3D Systems Corp. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Macro Environment: The macro environment for 3D printing OEMs remains challenging with a 16% year-over-year revenue decline, primarily due to customers' pause on CapEx spending for new production capacity tied to tariff uncertainty.
• Cost Structure Adjustment: Undertaking aggressive actions to adjust cost structure, aiming to deliver over $85 million in annualized savings by mid-2026. This includes organizational capacity alignment, business and legal entity rationalization, curtailment of some long-term R&D investments with long commercialization runways, and progress in restructuring like reducing contracted employee costs and professional services through upskilling internal workforce.
• Business Segments Progress:
  • Healthcare: MedTech business growing, with MedTech reaching over $80 million in annual revenue last year and growing 13% year-over-year and 16% sequentially this quarter. Dental has new product launches like the NextDent Jetted Denture Solution, with favorable economics and expected fast penetration.
  • 3P Strategy: Ability to help customers navigate from process development to parts production and printer sale, covering the spectrum from initial exploration to large volume production, with unique revenue streams and supported by a wide range of technologies.
  • Aerospace: Nearly doubled revenues from last year in Q2, with growth in parts and process globally, using technologies like SLS 380 polymer and DMP 350 triple laser metal system.
• Restructuring Impact: Already seen significant cost improvements with OpEx of $47 million in Q2, down 27% year-over-year and 24% sequentially, targeting OpEx in the low $40 million range by year-end.
• Regenerative Medicine: Core efforts with United Therapeutics on 3D-printed human lung continue to progress, with technical milestone attainment in Q2.

Segment Performance

• Industrial Solutions: Revenues of $50 million, down 23% year-over-year or 13% when excluding Geomagic. Driven by printer and material softness in consumer-facing end markets, but Aerospace and Defense saw nearly double revenues from last year and over 50% growth from the prior quarter.
• Healthcare Solutions: Revenues of $45 million, decreased 8% from the previous year. Primarily driven by Dental due to a significant year of purchases by a specific customer in 2024. Outside of Dental, MedTech delivered impressive growth, up 13% from last year and 16% from last quarter, reaching over $80 million in annual revenue last year.

Guidance

• Plan to deliver over $85 million in annualized savings by mid-2026.
• Target to exit Q4 2025 with OpEx in the low $40 million range.
• Expect continued sequential reductions in OpEx through the remainder of 2025.
• Confidence in achieving positive cash flow in 2026 by restructuring the business and driving process improvements.
• Expectations for growth in healthcare segments like MedTech and Dental, and other markets like Aerospace and Defense, AI infrastructure.

Risks

• Macro environment uncertainty, particularly tariff-related customer CapEx spending uncertainty.
• Timing risk associated with cost savings plans, especially regarding gross margins with many dependencies.
• Uncertainty in timing of facilities closures and subleases, as it depends on third parties signing subleases.

Question and Answer Q: Troy Jensen asked about breaking out MedTech between hardware and customized healthcare services, and how healthcare is grouped going forward, and an update on Dental progress.

A: Jeffrey Alan Graves responded that the vast majority of MedTech revenue is from personalized health services, healthcare is grouped with MedTech, Dental, and Regenerative, and Dental's NextDent Jetted Denture Solution has favorable economics and expected fast penetration with purchase orders starting to come in.

Q: Jim Ricchiuti asked about Dental progress excluding the aligner business and NextDent 300.

A: Jeffrey Alan Graves stated Dental business excluding aligner had a 3% drop with remainder of business performing well, and NextDent 300 has favorable economics and expected meaningful share of the market.

Q: Greg Palm asked about broader macro, dental opportunity, and cost reduction program.

A: Jeffrey Alan Graves said macro is stable with wait-and-see on tariffs, dental opportunity has favorable economics and affordable printers, and cost reduction program is executing to plan with some areas ahead of plan but timing of facility-related cost reductions uncertain.

Q: Trevor Sahr asked about other markets and R&D spend.

A: Jeffrey Alan Graves discussed Aerospace and Defense, AI infrastructure including thermal management of data centers, and R&D spend adjustment from 20% of sales to mid-teens as R&D focus shifts to more return-on-investment-driven areas.

Q: Alek Valero asked about in-sourcing manufacturing progress and customer discussion on mitigating tariffs.

A: Jeffrey Alan Graves said in-sourcing manufacturing is nearly complete, contributing to COGS and gross margin improvement, and customers are discussing using 3D Systems' systems to mitigate tariffs but face uncertainty on where to place capacity due to tariff landscape being a moving target