Greetings, and welcome to the Stratasys Q3 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Yonah Lloyd, Chief Communications Officer and VP of Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us to discuss our 2024 third quarter financial results. On the call with us today are our CEO, Dr. Yoav Zeif, and our CFO, Eitan Zamir. I would like to remind you that access to today's call, including the slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will also be available and can be accessed through the Investor Relations section of our website. Please note that some of the information provided during our discussion today will consist of forward-looking statements, including, without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes, and other future financial performance and our expectations for our business outlook. All statements that speak to future performance, events, expectations, or results are forward-looking statements. Actual results or trends could differ materially from our forecast. For risks that could cause actual results to be materially different from those set forth in forward-looking statements, please refer to the risk factors discussed or referenced in Stratasys' annual report on Form 20-F for the 2023 year. Please also refer to that annual report along with our reports filed with or furnished to the SEC throughout 2024 for additional operational and financial details. Reports on Form 6-K that are furnished to the SEC on a quarterly basis and throughout the year provide updated current information regarding the company's operating results and material developments concerning our company. Stratasys assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif.

Thank you, Yonah. Good morning, everyone, and thank you for joining us. Last quarter, we shared that we were taking decisive actions to better align our business with the realities of today's market. Importantly, beyond these actions, we remain agile, financially strong, and well-positioned to benefit from the eventual turn in the cycle. We are committed to the financial execution of our plans and have transformed the company by removing costs and streamlining the business to focus on the largest industry targets where we see the most opportunity for growth, particularly in manufacturing applications across automotive, defense, aerospace, medical devices, and dental. For example, the F3300, our most recently launched technological innovation, has generated excitement from the market and is expected to help us expand our presence in factory floor manufacturing across multiple industries. In dental, where 3D printing is already a standard method, our proven TrueDent solution is highly regarded for its groundbreaking disruption in both cost and fit when it comes to dentures. Additionally, our suite of specialized software offerings is starting to gain traction, which we believe will drive increased high-margin revenues in the coming years. Our key target industries demonstrate not just the greatest growth potential in our opinion, but also the most significant overall Total Addressable Market for additive manufacturing, and they are in the early stages of adoption. While we appreciate that we now must deliver on the initiatives we have put in place in a sustained manner and that it will take time, we are pleased to share that we are already starting to realize benefits. Following 10 quarters of positive adjusted earnings per share, as challenging market conditions persisted further, we incurred only minor losses on an adjusted basis in the first half of this year. Now, as a result of our transformative actions, and without the tailwind of any market recovery to this point, we quickly returned to profitability on an adjusted basis in the third quarter. These results demonstrate our team's ability to execute a comprehensive undertaking, an attribute that continues to set Stratasys apart. Now, let me dive a bit deeper into our results for the third quarter. Our business continues to demonstrate its fundamental strength through improved margins and our ability to maintain a robust balance sheet. We were able to deliver our eighth quarter in a row of year-over-year growth from our recurring revenue consumables sales. And similar to the second quarter, the resilience in consumables was primarily driven by FDM technology utilization. This underscores two key takeaways, the stability of our recurring revenue model and our customers' accelerating transition from prototyping to manufacturing applications. As customers increasingly leverage our solutions to optimize cost and enhance operational efficiency, we are well-positioned to expand our manufacturing presence with upcoming product innovations. We believe our focus on furthering customer enablement through additive education and investment will make a big difference as our customers enhance their understanding of how to fully utilize additive manufacturing design and workflow benefits in tandem with other traditional processes. Our strategy for driving long-term shareholder value centers on targeted innovation across materials, knowledge, and workflow solutions in high-growth target industries that benefit from emerging megatrends. Those include addressing supply chain risks, onshoring, new mobility, customization, sustainability, and a non-stop drive for greater efficiency and lower costs across the manufacturing spectrum. Through disciplined ongoing investment in technology and material development, coupled with a focused approach to key end-users, we are laying the foundation for Stratasys' next leg of growth once the current downcycle inevitably subsides. During the third quarter, we achieved a number of milestones and new product introductions. We continue to drive demand for our new flagship F3300 industrial platform, which we showcased at the International Manufacturing Technology Show in Chicago in September. Designed for superior performance, the F3300 delivers high-quality, durable thermoplastic parts with unmatched accuracy. It delivers faster print speeds with industry-leading repeatability, and significantly reduces downtime, making it the premier offering in its class. We continue to generate interest and orders for the F3300 and are already shipping systems to key customers, leading companies across automotive, aerospace, and defense sectors, along with commercial and industrial manufacturers. During the third quarter, we launched our new Origin 2 printer, along with the Origin Cure post-processing system. While our primary focus is on expanding additive manufacturing at scale, this solution helps a subset of our customers focus on the growing demand for injection-molding quality for short production runs. A great example of a target industry for this technology is connectors, where manufacturing costs are high and the production runs are in line with what this particular technology can deliver. This is one of many compelling opportunities for us and for our customers such as TE Connectivity, who serve the aerospace, automotive, and other sectors. We also launched our Stratasys Neo Build Processor for investment casting, a unique solution designed in collaboration with Materialise to accelerate the production of high-quality investment casting master patterns. Developed for the Neo450 and Neo800 SLA printer, the Neo Build Processor delivers up to 50% faster file processing and significantly enhanced print speeds, streamlining the 3D printing workflow for manufacturers and service bureaus in the aerospace and other demanding industries. Given our focus on returning value to shareholders, in September, our Board of Directors approved a $50 million share repurchase plan, which we have already started to execute. We are committed to maximizing shareholders' value while maintaining a strong balance sheet and are taking additional steps to unlock value, including seeking to monetize certain high-value assets. I'd like to take a moment to provide additional details on the critical strategic initiatives that we have implemented recently. On last quarter's call, we unveiled a plan designed to reinforce our industry leadership and ensure sustainable profitability across market cycles. Our action plan centers on two critical objectives: realigning our operational costs with current market dynamics through a workforce reduction of 15%, and intensifying our focus on accelerating customer adoption by eliminating implementation barriers. These measures aim to create a more resilient business model that consistently generates profits and positive cash flow. Our implementation of the restructuring plan is ahead of pace, as evidenced by the improvement in operating margins that Eitan will discuss in a moment. We are on a track to achieve our target of $40 million in annual cost savings, starting in the first quarter of next year, while also enhancing our go-to-market strategy to focus on the highest growth products, materials, and software solutions. These actions are designed to help us align costs with current conditions, build a long-term profitable, cash-generating business and stay agile during downturns while being ready to respond quickly when customer spending returns. Importantly, we are committed to delivering increased profitability and cash flow in 2025 that we discussed on our last call. We are confident that once current headwinds subside, renewed access to capital will spur customer spending to more accurately reflect the expressed high demand for our solutions.

Thank you, Yoav, and good morning, everyone. This quarter demonstrated the resilience of our operating model, a key differentiator relative to peers in our sector, as well as the fast actions of our team as we delivered improved gross margin and bottom-line profit despite year-over-year pressure on revenues. These results were thanks in part to yet another quarter of year-over-year growth in consumables sales and faster-than-anticipated progress on our cost control initiatives, enabling us to increase our profitability expectation for the year. Now, let me get into the details of our numbers. For the third quarter, consolidated revenue was $140 million compared to $162.1 million in the same quarter in 2023, due to persistent softness in capital equipment spending. Product revenue in the third quarter was $94.1 million compared to $113.2 million in the same period last year. Within product revenue, system revenue was $31.7 million, a sequential improvement from the second quarter, yet off compared to the $51.5 million we produced in the same period last year. Consumables revenue grew 1% to $62.4 million compared to the same period last year. As Yoav mentioned, this is our eighth straight quarter of year-over-year growth. Our ability to consistently grow consumable sales despite the changing backdrop signals that the utilization rates of the systems we have sold remain robust. It's important to note that we continue to expect consumables demand to be resilient for the foreseeable future, despite recent weakness in hardware sales, as the installed base continues to be well utilized. Service revenue, including Stratasys Direct, was $45.9 million compared to $48.9 million in the same period last year. Absent divestitures, service revenue was down a bit more than 0.5%. Within service revenue, customer support revenue was up 1.3% compared to the same period last year. Now, turning to gross margins. GAAP gross margin expanded to 44.8% for the quarter compared to 40.5% for the same period last year. Non-GAAP gross margin also grew to 49.6% for the quarter compared to 48.3% in the same period last year, and it's the highest since Q4 2019. The improvement versus the prior year period was driven in part by a greater mix of consumables and higher margins at Stratasys Direct due to divestitures. GAAP operating expenses were $88.2 million compared to $108.4 million during the same period last year. The improvement in expenses was primarily due to lower costs related to prospective and potential mergers and acquisitions, defense against a hostile tender offer, proxy contest, and related professional fees. Non-GAAP operating expenses were $69.6 million compared to $74.2 million during the same period last year, due primarily to lower employee-related costs, including early benefits from the cost-saving initiatives announced last quarter. Non-GAAP operating expenses were 49.7% of revenue for the quarter compared to 45.8% for the same period last year. Regarding our consolidated earnings, GAAP operating loss for the quarter was $25.5 million compared to a loss of $42.8 million for the same period last year. Non-GAAP operating loss for the quarter was $0.1 million compared to operating income of $4.1 million for the same period last year. The change reflects the lower overall revenue, offset somewhat by the improved gross margin and lower employee-related costs. GAAP net loss for the quarter was $26.6 million or $0.37 per diluted share compared to a net loss of $47.3 million or $0.68 per diluted share for the same period last year. Non-GAAP net income for the quarter was $0.4 million or $0.01 per diluted share compared to net income of $2.4 million or $0.04 per diluted share in the same period last year. Adjusted EBITDA was $5.1 million for the quarter compared to $9.8 million in the same period last year. We also improved our cash utilization during the quarter as we only used $4.5 million of cash in our operations during the third quarter compared to $12.7 million in the same quarter last year. Year-to-date, our operating cash flow remained positive. We ended the quarter with $144 million in cash, cash equivalents, and short-term deposits compared to $150.9 million at the end of the second quarter this year. Our balance sheet remains strong and is expected to improve as the impact of our cost-saving measures accelerates in the fourth quarter of this year and beyond, strengthening our ability to act on value-enhancing opportunities. Now, let me turn to our outlook for 2024. We are reiterating our expectation that full year 2024 revenue will range between $570 million to $580 million. We are raising the margins and profit forecast. From a gross margin perspective, we now expect the full year 2024 to be slightly higher than what we shared on our last call in the range of 49% to 49.2%. For 2024, we expect our operating expenses to range between $276 million to $278 million. We expect non-GAAP operating margins to range between 0.6% to 1.3% for the full year. We anticipate a GAAP net loss of $105 million to $90 million or $1.48 to $1.27 per diluted share. And non-GAAP net income of $2.1 million to $5 million or $0.03 to $0.07. Adjusted EBITDA is expected to be in the range of $25 million to $28 million for the year. Capital expenditures are expected to range between $15 million to $20 million for the year. And while we are not providing a formal 2025 outlook, to Yoav's point on the actions we are taking to align the business to current conditions, we would expect to generate an 8% EBITDA margin even if there was no revenue growth compared to 2024. And if we can achieve even slightly moderate revenue growth, given the operating leverage in the business, we could reach at least a 10% EBITDA margin. With that, let me turn the call back over to Yoav for closing remarks.

Thank you, Eitan. With our effective implementation of key initiatives to transform the company since the end of the second quarter, we have streamlined operations, improved margins, and tightened our focus to the most compelling use cases. We are enabling our customers to more easily ramp their adoption of additive manufacturing with enhanced go-to-market engagements and better education for their system users. We are laser-focused on delivering increased profitability while preserving our strong balance sheet. With our market-leading systems, software, and consumables, we are poised to outperform when capital spending returns. Stratasys has been a leader in additive manufacturing for decades. And with the actions we have taken, we have repositioned the company to extend that leadership in the years ahead. Our customers continue to expand their use of our systems and solutions. Through this turbulent point in the cycle, we are setting the stage for a return to significant growth, expanded profitability, and value creation for our shareholders. With that, let's open it up for questions. Operator?

Thank you. We'll now be conducting a question-and-answer session. Our first question is coming from Jim Ricchiuti from Needham & Company. Your line is now live.

Alright. Thank you. So, if I look at the implied revenue guidance for Q4, which is up sequentially, your EPS guidance seems to suggest a breakeven, kind of a breakeven quarter. And so my question is, are you anticipating some pullback in gross margins where we've, obviously, seen some nice improvement, or maybe is there something else in OpEx, higher trade show expense or some other factors? And then, I have a quick follow-up.

Thanks, Jim, for the question. So, let me help you maybe and everyone to think how to model Q4 and the full year. As you probably saw, we've updated the annual 2024 EPS to $0.03 to $0.07. When you take the first nine months' EPS and you deduct that from the annual EPS, you get to a Q4 that is in the range of positive $0.08 to positive $0.12 for Q4 only. So, I'm not sure the math...

Okay. You know what, it's my mistake. I apologize. I may have just had some bad notes. Thank you for clarifying.

For sure, but actually it helps me if that's okay to highlight that. This is exactly the change we announced last quarter. We said that Q3 will start to benefit from the savings, but Q4 is going to be significantly positively impacted by the restructuring, and it is translated into that relatively high EPS level in Q4.

Thank you for clarifying that. My follow-up question relates to the fact that while I understand you aren't providing specific guidance beyond Q4, you've indicated some year-over-year improvement, including in Q4. Is there any reason to believe that the same won't apply to Q1 from a year-on-year perspective? I recognize there will be normal seasonal changes from Q4 to Q1, but I am curious about early indications for next year, especially given the current market uncertainty. Thank you.

Thanks, Jim. So, as we noted, actually to continue from my last answer, when you take the actual three quarters and the full guidance on the revenue, basically the derivative is Q4 that is between $148 million to $158 million, as we noted. This is partially a seasonality Q4 has been strong for us and for most of the industry over the years. So, it's a seasonality, it's a pipeline that we see, but it's too early to say how the first half of 2025 would look like, and we're not guiding of course yet about 2025.

Thank you.

Thank you. Next question today is coming from Troy Jensen from Cantor Fitzgerald. Your line is now live.

Hey, gentlemen. Congrats on the good cost cuts and good results here.

Thank you.

Hey, everyone. First, regarding the consumables, I know you've seen strong year-over-year growth with eight consecutive quarters of it. However, on a sequential basis, it has declined for two straight quarters, and the year-over-year growth rate has dropped from about 12% to 1%. Could you address any concerns about this potentially going negative in Q4 and what measures will help us return to high-single-digit growth in consumables?

Hi, Troy. Thank you for the question. I think this is something that differentiates Stratasys. We have a very solid recurring revenue model, very solid which helps us, especially in those challenging times. If I look at consumables, first of all, the fact is that it grows year-over-year, and this growth is a reflection of the solid revenue stream. One thing for sure, it is growing year-over-year. And we can see it's a trend and it is supported by the fact that we are going to manufacturing that we have a large installed base and this installed base is growing year over year over year. And the fact that we are going to manufacturing support higher utilization and we are also selling more high-end equipment that consume more faster. So, new systems will always consume more than an old system, and this is a very healthy trend. Quarter-by-quarter, it could be lumpy, but year-over-year, we are committed to growth. And we are putting out new materials regularly. So this is part of the ongoing business. Every quarter we have more materials on top of the fact that we have already the largest portfolio of materials.

That's fair. Okay. And just a second question, I believe last week there was another round of workforce reductions. Curious was this a new initiative or was this kind of the continuation of what you guys said three months ago?

I don't know, maybe you reduced the workforce, but we did not. We had one restructuring, and of course, there are some ongoing regular courses of business of people living and we are recruiting, but there was one restructuring, one move, we executed it ahead of plan, which helped us already in Q3, although we didn't plan for it. And it's put us in a great position, both commercially, financially, and in terms of the cash position that we finished the quarter, better than we expected.

Understood. Alright, guys, good luck going forward.

Thank you. Next question is coming from Greg Palm from Craig-Hallum. Your line is now live.

Yeah. Thanks for taking the questions and congrats on the better results here. Maybe just to start thinking back on the last 18, 24 months in this cycle, just thinking about just softer manufacturing, policy uncertainty, you've had inflation, interest rates, all that stuff that we've talked about, any way to kind of rank order the importance of some or all of those? And I guess, where I'm going with this is even in an environment where maybe rates don't come down, if we've got at least sort of policy certainty in a little bit sort of better manufacturing activity, does that give you more confidence that maybe you can see some of this pent-up demand sort of flush through the pipeline? Just kind of curious to get sort of your broader thoughts going into 2025.

Thank you for the question. The current macro environment is fundamental to our situation. In a high-cost capital landscape, our customers feel less urgency to invest in new technologies. This is our current reality. The overarching macro conditions are undoubtedly the primary concern. However, there are still significant opportunities, such as the utilization of our equipment and machines. We recognize that this technology is essential, and it is becoming increasingly important for our customers. We are using this time to enhance what we believe is the best product portfolio in the industry, ensuring we are prepared for the eventual positive shift in the market. We believe this is a cyclical situation, but the key megatrends remain relevant. We have been discussing these trends for years, and we are now focused on capitalizing on their benefits. The need for resilience, an agile supply chain, on-shoring due to the current geopolitical climate, localization of manufacturing, new mobility trends, and customization, particularly in medical and dental applications, are all critical factors. The digitalization of manufacturing is also a vital trend, irrespective of interest rates. We believe it’s merely a matter of time before the market shifts in our favor, and we are committed to investing in education and enablement to increase the adoption of our technologies in proven use cases. When I refer to proven use cases, I mean those where our additive solutions outperform traditional methods and offer a strong return on investment. Unfortunately, there is currently limited customer interest in adopting these innovations due to prevailing macroeconomic conditions. For instance, in the aerospace and automotive tooling sectors, we have a North American automotive tooling customer with multiple machines from us, yet less than 1% of their tooling expenditure is directed toward additive manufacturing, despite this being a $12 billion market. When we inquire about the potential for additive applications, customers estimate it could account for 25% to 27% of their spending, whereas we are only seeing 1% at present. We anticipate that with improved macro conditions, there will be significant growth opportunities.

Got it. That's helpful. If I could shift gears to the gross margin guidance specifically, I appreciate the conservatism. I think the implied guidance for gross margin for the year suggests that Q4 gross margin will be flat to down, despite significantly higher revenue levels than what you just reported, with maybe a slight benefit from restructuring. Is there a mix issue compared to Q3, or is it primarily a matter of being conservative?

Thank you for the question. First of all, based on our forecast, we anticipate that the Q4 gross margin will be slightly higher than Q3. This leads us to expect a full-year total guidance between 49% and 49.2%, and we are confident in our ability to achieve this. We expect to sell more hardware in Q4, which you mentioned could impact the mix. However, we are very optimistic about the potential to grow hardware in this environment. It’s all about the mix, and we are gradually increasing and improving our gross margin. The 49.6% gross margin this quarter is the highest since Q4 2019 and nearly a record for the last five years. Overall, our gross margin over the past few quarters has been strong and stable, and we believe that with our restructuring and other initiatives, we will continue to enhance and increase it in the near future.

Okay. Yeah, it's a good point. And I guess just last one, maybe a clarification. Did you say you've already started buying back stock? I thought I kind of heard that and just kind of curious to hear what your thoughts around of sort of the pace and usage of that authorization.

Sure. We've started to purchase shares in Q4 and we will update you as part of the Q4 results that's going to be part of our, of course, financial reporting process, but we do that gradually and we find the right balance between the purchase of shares and securing our cash position. But to your question, we've started the process, yeah.

Understood. Okay. I will leave it there. Best of luck. Thanks.

Thank you. Our next question is coming from Brian Drab from William Blair. Your line is now live.

Thank you. I don't know if you made any comments on the 3300, but can you update us on how that rollout is going? I think on the second quarter, you said you're hoping to sell a few more of those in the second half of the year than the first half. Thanks.

Thank you, Brian, for the question. In two words, it's going well. This is our flagship in industrial solutions. It's a comprehensive platform starting with the F3300, and it definitely delivers superior performance for industrial users, as we hear from our customers. We have shipped to a variety of markets, with our first customers being highly trusted and professional ones like Toyota, BAE Systems, and Nissan, among others. There will be a flywheel effect because when these customers purchase a machine and adopt it, it prompts others to do the same to remain competitive. This machine offers double the speed of any other in its segment. Overall, things are going well. We have a strong pipeline and backlog, and we remain very optimistic while continuing to invest in expanding this platform.

Thank you. I have one more question. The election results are very recent, but discussions about the possible outcomes and tariffs have been happening for months. I'm curious about your views on the opportunity for on-shoring and a focus on US manufacturing to benefit Stratasys. Have you had any discussions with customers where you see some progress? Which end markets do you think might benefit in this scenario? Thank you.

Thank you for the question. The recent results clearly reflect the ongoing megatrends, particularly in localized manufacturing and on-shoring, which are beneficial for us. While I can’t disclose anything specific about our customers right now, I participated in a CEOs' conference last year where we discussed the implications of the US-China relationship. It became evident that additive manufacturing has significant advantages in navigating this decoupling from China, and I believe this topic has gained even more relevance recently. Therefore, we remain optimistic.

Thank you. Next question is coming from Jacob Stephan from Lake Street Capital. Your line is now live.

Hey, guys. Thanks for taking the questions. I'll kind of ask a similar broader macro question in a little bit different way. But obviously, we've had two rate cuts since you last reported, the change in administration and there's also been an acquisition of one of your competitors. I'm just curious maybe you could kind of help us, I guess, quantify or qualitatively maybe, how are you seeing demand trends in some of your newer product lines with the Origin 2 and maybe Neo and maybe contrast that to the H350?

Thank you for the question. Demand is present, and in some instances, we have an increased number of leads depending on the country, technology, and use case. In fact, we have even more leads now than we did before the downturn, which is remarkable. The issue is not the quantity of leads or the level of engagement or interest; rather, it's the sales cycles. Customers are taking significantly longer to make decisions. Currently, there is little urgency to adopt new technologies or invest capital. The pent-up demand is indeed there, as we have always indicated.

Got it.

...we believe that those megatrends, plus the changes in the market, and you mentioned two very important changes. One is the election and economic atmosphere and the other one is the fact that there was excess supply in additive manufacturing, which was not sustainable and how many companies are pushed out of the market and it's healthy. It's a process of being more mature as an industry and focusing on what is important to our customers. And that's what we are doing. I'll give you an example. We are focused on automotive. So, we are going to the most difficult customers that have the highest requirements, for example, Formula 1 customers or motorsport customers. And we proved the point that our technologies like wind tunnel where we are already more than 60% of the Formula 1 with this or end-use parts for automotive and short-run automotive producers in car racing. Once you prove it there, it's only a matter of time before we will open up to mass manufacturing. And we shift our focus from proving the use cases and the advantages of these use cases to mass production.

Okay. Thank you. And then maybe just switching to the restructuring initiative, appreciate all the color on that, but now that you're kind of a few months into it and it's tracking well ahead of expectations, are you seeing any other areas where maybe you can take additional costs without any additional layoffs? Or do you feel like this $40 million is kind of the only significant change you'll make? Thanks.

Thanks, Jacob, for the question. So, first of all, we're always focused on efficiency and very tightly monitor our costs. The restructuring plan has significant headcount-related savings, but there are also other savings as we mentioned also on the last quarter's earnings call. This restructuring plan was driven by a strategic change or update. So, there are projects that are no longer part of our strategy and where fields were canceled. We shut down certain locations. There are different cost savings that are non-headcount related and we're very focused on completing these areas. And that's why we said that we expect only at the beginning of next year to achieve the fully annualized impact of the $40 million that we promised the market. As you mentioned we're ahead of the plan. It helps us to shift to profitability already in Q3, which is better than we promised last quarter and expected. Significant savings will be realized in Q4. That's why we have confidence in the ability to deliver significant EPS in Q4. That will of course translate into positive cash flow once those savings are materialized to significant cash flow impact in 2025 which is important. And that will put us in the best commercial and financial position in the market. As we mentioned earlier and also last quarter, once the $40 million annualized savings are achieved that will be translated into an 8% EBITDA assuming that there is no change in the revenue levels. And if revenue levels will increase, that could get us very quickly to double-digit EBITDA, which is very meaningful and critical for us and, of course, for the market.

Appreciate it, guys. Thanks.

Thank you. Next question today is coming from Alek Valero from Loop Capital Markets. Your line is now live.

Thank you for taking my question, and congratulations on the results. I have a quick follow-up regarding the annual cost savings. In your last earnings call, you mentioned a target of a 15% headcount reduction by the end of this year. You noted that you are ahead of plan, which I understand, but could you provide some insight into how much percentage remains for this year?

Thank you, Alek. So maybe I will elaborate a little bit about what does it mean to be ahead of plan, okay? So, first of all, out of the $40 million we mentioned earlier, out of the $40 million saving target, a significant portion is headcount. But again, there are many other initiatives that are non-headcount related. Again, few examples are, closing certain locations. We're a global company that acquired a few businesses in the last few years and there are a few other examples. But again, I want to emphasize it's not only a headcount related. So, when we say that we are ahead of the plan, and, of course, you've experienced many companies that announced restructuring, we're actually quite proud of our ability to execute what we've announced on August 29 on the second quarter earnings call to be able to very quickly execute this plan and to achieve some of the savings already in Q3, which means one month after we announced it as part of the Q2 earning call, that's something that we're very proud of and, of course, came with a lot of effort, but it's still only a small part of the annual target saving. That's why in Q4, we're certain we have much more confidence on the ability to achieve much bigger significant portion of the annualized level and to generate those high EPS that I mentioned earlier.

Yeah, that's super helpful. Thank you for that. Just as a quick follow-up, change it up a bit here. Can you guys maybe say a few key milestones that we should look out for TrueDent moving into next quarter and beyond?

That's a great question. We are very proud of our TrueDent solution. It is so unique that when we meet with dentists, they are amazed at its capabilities. Anecdotally, we can reduce the number of dental visits from six to eight down to two, while still ensuring that customers and patients feel more comfortable with their new dentures. This effectively positions us as a leader in restorative dental care. We offer the first, best, and most aesthetically pleasing monoblock dentures on the market. I want to express my gratitude to our teams, particularly for their work on the restructuring. Their performance has been exemplary. When discussing our milestones, it’s essential to focus on two areas: our penetration into clinics and regional expansion. A significant milestone we are targeting is moving from North America, specifically the US, to EMEA and APAC, and this will happen soon. Additionally, as we work on penetrating the dentist market, we are focused on building credibility and providing education through partnerships with leading institutions and labs, beginning in the US and expanding to Europe. You will see us progressively showcasing our solution and continuously enhancing it, particularly in terms of aesthetics and translucency. We will present our advancements at the IDS show in late March, the largest dental event globally, attracting around 180,000 participants in Germany. We anticipate establishing a presence in more regions, increasing clinic numbers, and gaining credibility through recognition from top dental institutions, and also engaging with various bodies that endorse dentures. For instance, we are collaborating with the government, including the Army. In summary, we are expanding into more regions to obtain certifications and are opening additional clinics through new credentials.

Awesome. Thanks so much for that, guys. Appreciate it.

Sorry, one more thing. So, this is about our dentures. Another super important use case for us is government and defense. This is a growing segment and we will keep growing. Some may say unfortunately, but it keeps growing. We are very strong there. We are the leader in aerospace and defense, and there are strong milestones that we put in front of us in terms of opening up new applications in defense, and you will see it as well.

Thank you. Our next question is a follow-up from Jim Ricchiuti from Needham & Company. Your line is now live.

You've touched on the question I want to ask. In terms of where you're seeing some early signs of recovery, you seem encouraged by what you're observing in dental. You appear to be more optimistic about aerospace and defense as well. I'm curious if you're noticing that translating into systems demand. I'm looking to understand your end markets; are you seeing more signs of recovery? Conversely, from an investment perspective, are customers in other sectors, such as automotive, still being more cautious?

I would say in this order, government and defense, aerospace, automotive tooling, dental, and medical.

Okay. Helpful. Geographically, were there any changes in demand trends that you observed in the quarter?

Not really. Like, it started in the US and it moved to EMEA and APAC, but currently it's a soft hardware market.

Okay. And maybe if I could slip one final one in, just you seem to be seeing some nice progress with GrabCAD Print Pro. I'm wondering is there any way to think about the revenue contribution in this area of the business as we look out over the next year.

Jim, that's a good question. We put a lot of efforts around our software solution. As you mentioned, revenue is increasing, is growing significantly. I'll just remind everyone that software is coming with the highest gross margin out of the different streams. The attachment rate is very promising and we're very proud of. When it becomes big enough, of course we will provide more granular data around the revenue, but the progress and the trend is very promising and we're very excited about it.

Let me ask, Eitan?

Yes.

Let me be even more specific. We are selling software, and there is growth year-over-year in our sales, and as you know software is a great way to lock in customers for the long term, because those are recurring revenues and you push more features and you have direct relationships with the customers. And the nice thing is that we are selling more GrabCAD, mainly the Pro and premium solutions of GrabCAD, we have Print Pro and Streamline Pro. There is demand, we are selling more. I meet many customers every week, every quarter. And the nice thing for me was like, "Wow, we have a great software," when they asked me, "Can you put your software on other OEM players?" And this is a great proof point of how good our software solution is.

Got it. Thank you. Congratulations on the quarter. Thanks.

Thank you.

Thank you.

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

Thank you for joining us. Looking forward to updating you again next quarter.

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