管理層發言
Greetings, and welcome to the 3D Systems Q2 2026 Earnings Webcast. 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, please go ahead.
Hello, and welcome to 3D Systems Second Quarter 2026 Earnings Conference Call. With me on today's call are Dr. Jeffrey Graves, President and CEO; and Phyllis Nordstrom, Chief Financial Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. With that, I'll turn the call over to our President and CEO, Dr. Jeffrey Graves, for opening remarks.
Thank you, Monica, and good morning, everyone. Today's call is accompanied by two important announcements: our earnings results and the beginning of a leadership transition plan, both of which I will address this morning. I will begin by reviewing a few important highlights from our second quarter and first half as well as provide updates on several of our key market focus areas. After that, I'll address this morning's leadership announcement. I'll then turn the call over to Phyllis Nordstrom, our CFO, who will summarize the quarter's financial results and outlook, and we'll then open the call up for Q&A. So with that, let's turn to Slide 5. A major theme clearly emerging this year is the return of capital spending by our customers in key markets. The timing is excellent given the intense focus we have placed on refreshing our product portfolio over the last three years. In the second quarter, printer sales increased by more than 45%, led by our best-selling DMP 350 metal printing system, our new SLA 825 flagship polymer platform and our multi-jet printing systems that form the cornerstone of our new denture product line. I'll comment on each of these in the context of their market drivers in a few moments. From a business unit standpoint, our Healthcare business once again delivered solid growth and remained the company's largest segment, driven in particular by strong demand for new printing systems in both medtech and dental markets. Industrial business revenue was modestly lower year-over-year as older systems in our installed base are now being increasingly replaced by our new printer platforms. Despite this dynamic, our two key industrial focus markets, aerospace and defense and data center infrastructure, both delivered strong double-digit growth again this quarter. I'll share a few highlights on those markets momentarily. And moving to Slide 6. Our newest generation of 3D printers offer levels of precision, economics and robustness that were only dreamed of a few years ago. These advancements are now proving essential to the widespread adoption of 3D printing in key production environments. One of the clearest trends is the accelerating use of 3D printing in metal component manufacturing. As we've discussed on previous calls, there are two equally important paths to producing metal parts: direct metal printing using laser powder bed fusion and metal castings that rely on 3D printed patterns as a critical step in the manufacturing process. To address each path, we've launched two important systems: our DMP 350 triple laser direct metal printer and our SLA 825 dual laser polymer printing system designed for high-quality metal casting patterns. Sales of both platforms into our key markets have been very strong with second quarter growth of roughly 90% and 125%, respectively, year-over-year. Given this rapid rise in demand for 3D-printed metal parts, we're also significantly expanding our internal metal parts production capacity. This is an important element of our growth strategy, and I'll touch on it in more detail in a few moments. The third breakthrough product we have brought into the market is the NextDent 300, purpose-built for the production of dentures. This platform is being very well received because of its precision and economics, enabling dental professionals to deliver a high-quality, durable product that improves the patient experience while increasing the productivity of their practices. These technologies will continue to enable our success in key markets for years to come. Now on to Slide 7. As proud as I am of our refreshed product portfolio, it would mean very little if we did not target these systems effectively at markets moving most decisively toward the adoption of additive manufacturing technologies. Four markets fit this profile very clearly: medtech, dental, aerospace and defense and data center infrastructure. Two of these sit in our healthcare business and two in our industrial business. Customers in these markets derive exceptional value from 3D printing from enhanced design flexibility that improves both performance and cost and helps reduce supply chain risk in an increasingly volatile world. With limited time on each quarterly call, I'll focus on a few key use cases that I hope will capture the excitement and momentum these four markets provide. Moving to Slide 8. I'll start with aerospace and defense with a specific focus this quarter on space applications. As everyone is aware, there's been a resurgence of interest in space access with applications ranging from new satellite constellations for communications to large-scale orbital data centers and even interplanetary travel. These visions are all enabled by the remarkable advancements achieved in reusable launch vehicles. These enormous rockets have already reduced the cost of access to space by an order of magnitude and the next generation of fully reusable vehicles is positioned to drive cost down even further, making these large-scale applications in space far more economically viable. The impact of this breakthrough in rocketry is clearly visible in launch cadence. A rocket to space is now launched roughly every two to two-and-a-half days. In short, what used to be a yearly total for the entire global industry is now being achieved by a single company in a matter of weeks. This acceleration is expected to continue as reusability improves and costs decline further. A critical enabler of this progress has been the development of advanced rocket engines designed for high flight rates. These engines use a sophisticated combustion architecture that improves efficiency and durability while reducing maintenance between flights. Additive manufacturing has been integral to this evolution, both through direct metal printing of complex geometries and even more so through high-precision investment castings made from 3D printed patterns. Our SLA 825 dual laser system launched late last year is specifically targeted at these advanced casting applications. As evidence of its early success, in the second quarter, we received one of the largest industrial printer orders in our company's history, driven by demand for casting patterns used in next-generation reusable rocket engines. Production of these engines is expected to grow by nearly an order of magnitude over the next decade as launch cadence continues to accelerate. These capabilities are helping make fully reusable heavy lift vehicles more practical and are contributing to the sharp reduction in the cost of access to space. Moving to Slide 9. Let's turn to the healthcare business with an update on our dental market. Of the four dental markets—straighten, protect, repair and replace—3D printing has already proven its value at scale in tooth straightening. Building on that foundation, the next large growth opportunity is converting the historically labor-intensive replace market for dentures into a fully digital 3D-printed monolithic denture product, an objective we have been intensely pursuing for the last three years. With more than 30 million denture wearers in the U.S. and nearly 4 million new dentures sold each year and comparable numbers in Europe, the end market opportunity is measured in the billions of dollars. Based on these estimates, the corresponding revenue potential for our company exceeds $150 million annually in printers and consumables sold to the dental labs that produce dentures, with a similar opportunity in Europe. We launched our NextDent 300 denture printing system in late 2025, following FDA clearance, and secured full EU MDR approval for sale into Europe in the second quarter of this year. Since that time, acceptance by dentists has been strong, driven by the quality of the product, its durability and the comfort patients experience from the first fitting. These clinical benefits create demand while the efficiency of the digital production process and shorter lead times translate that demand from dental labs into revenue for 3D Systems. The result has been a rapid rise in demand each quarter since launch, as shown in the production chart on Slide 9. While the market is highly fragmented with more than 8,000 labs across these regions, revenue is concentrated in the top 300 to 400 manufacturers. Based on our current outlook, we expect to have printers installed in more than 100 of these dental labs by year-end with a growing number of multiunit deployments to follow. Importantly, once operational, even these initial printers alone will generate a recurring revenue stream of more than $2 million annually at highly accretive gross margins. While encouraging, these sales represent less than 2% penetration of the overall denture market in the U.S. and Europe, meaning the future growth potential is very strong. As an example of customer receptiveness to this technology, one of our earliest lab customers purchased their first printer late last year and is already installed and running a sixth unit, tripling their historic capacity. We now see others following suit. For early adopters, this creates a clear path to market share gains through lower production costs and faster turnaround times. Looking ahead, with regulatory approvals expected in Mexico, South America and several Asian countries over the next year, combined with the strong acceptance rates we're seeing in the U.S. and Europe, we expect our denture-related revenue to become one of the largest and most profitable streams for the company in the years ahead. Moving to Slide 10. We come to one of the most exciting growth opportunities in our industrial business, second only to aerospace and defense: data center infrastructure, a market we have been building for several years. This market spans several high-value applications, including semiconductor manufacturing equipment, advanced GPU cooling systems and emerging energy generation technologies, including both nuclear fission and fusion-related applications. We participate in these markets in two complementary ways by supplying precision metal printed parts directly to customers and by providing printers that enable them to manufacture these components themselves. In the second quarter, our semiconductor and high-performance computing business grew almost 30% year-over-year, building on strong first-half momentum. Growth was driven primarily by demand for metal printed parts, while the pipeline for new printer systems also remains healthy. This distinction is very important. While printer sales expand our installed base, the growing volume of parts we manufacture for these customers is a key lever for improving the gross margin profile of our metal printing business over time. As production volumes scale and we continue to optimize our manufacturing operations, we expect parts manufacturing to become an increasingly meaningful contributor to both revenue and profitability. Over time, many of these customers are also natural candidates to adopt our metal printing systems as their volumes increase. Looking ahead, the unprecedented level of capital investment flowing into data center infrastructure continues to create strong demand for complex, high-performance metal components that are difficult or uneconomical to produce with traditional methods. Direct metal printing opens new design opportunities that will play an important role in future chip manufacturing capability and cost. We believe we are well positioned to capture a growing share of this market through both our parts manufacturing capabilities and our advanced printer platforms. From an energy perspective, we're already seeing demand related to large land-based turbine manufacturing, which benefits from both our polymer systems used in investment casting and our direct metal printing systems. Given the significant electrical demands for data centers and the growing need for hyperscalers to secure their own power, there is increasing interest in metal 3D printing for next-generation nuclear applications, including small data center-focused designs as well as fusion-related components that require materials capable of withstanding extreme temperatures and radiation. These are areas where traditional manufacturing is often difficult and very costly. Turning to Slide 11. I want to highlight the resources we're drawing upon to expand our energy-related activities. As many of you know, 3D Systems is headquartered in South Carolina, and we're fortunate to have one of the leading organizations in nuclear research as our neighbor, Savannah River National Laboratory, or SRNL, as it's known. For decades, SRNL has conducted critical research and development in support of nuclear energy, spanning nuclear materials and component processing to system applications relevant to both national security and commercial power generation. I'm pleased to announce that we've executed a cooperative research and development agreement, or CRADA, with SRNL. This partnership will enable our organizations to collaborate on the development of new materials for the extreme environments of nuclear fission and fusion reactors, on component design and manufacturing and on the use of AI to optimize processing and performance. We believe direct metal 3D printing will play an essential role in developing and scaling these technologies. Of particular note, this collaboration will leverage the Advanced Manufacturing Collaborative, a 63,000 square foot research and innovation center operated by SRNL on the University of South Carolina Aiken campus, which opened in 2025. As the only Department of Energy facility of its kind located on a university campus in South Carolina, the AMC is uniquely positioned to support both R&D and the training of engineers in advanced manufacturing processes, including metal 3D printing. In short, this partnership provides a clear pathway from collaborative research on nuclear energy applications to commercial scale industrial opportunities in the United States. We view it as an important element of our longer-term growth strategy in advanced energy markets. Moving to Slide 12. I'd like to take a few minutes to describe how our direct metal printing technology is differentiated, an area that represents a major growth vector for the company. Our metal printing systems were originally developed to manufacture critical components from highly reactive materials used for medical applications. These systems were designed to meet the highest quality standards required by the FDA and European regulatory bodies. Central to that capability is exceptional environmental control during the printing process, which minimizes reaction with oxygen. As a result, our systems rank among the best in the world at printing titanium, a lightweight, strong, temperature-resistant and biocompatible material as well as cobalt chrome alloys used in joint replacement. Today, we maintain a large active installed base of metal printers with leading medical device OEMs and their contract manufacturers, along with our own fleet of metal printers in the U.S. and Europe, producing parts daily for implantable applications. Building on this foundation, over the last several years, we've expanded our metal focus into aerospace and defense, data center infrastructure and advanced energy applications. As demand has grown for components made from nickel-based superalloys and refractory metals such as tungsten, molybdenum and niobium—materials used in extreme temperature and stress environments—we've engaged with leading OEMs on these applications. These high-performance materials are extremely difficult to fabricate with traditional methods. Direct metal printing not only enables conventional designs to be manufactured economically, but also opens the door to new configurations that can improve system performance and reduce cost. The commercial results are now clear. Sales of our metal printers are growing at record rates. In fact, we sold more metal printers in the first half of this year than in all of 2025 and demand continues to rise. Looking ahead, with the support of the U.S. government, we're building on this strong foundation through the development of a large-scale metal printing system capable of manufacturing components over one meter in size at quality levels and production rates that we expect to lead the industry. Importantly, this system is being designed and will be manufactured entirely in the United States, including the critical application development work required for targeted markets. Finally, let's turn to Slide 13, and I'll conclude my comments on the quarter with a brief summary of our metal parts expansion plans. Demand for direct metal printed parts is rising rapidly. This is not only driving sales of our printer systems, but increasingly, our customers are asking us to supply finished metal parts. These are typically very challenging production parts that combine extreme performance requirements with highly advanced materials and therefore generally command a higher average selling price. Given our application development work with OEMs and our ability to ultimately provide printers for their own use, this is a natural request by our customers. By fulfilling it, we can effectively bridge a customer from concept demonstration to full-scale production without the need to qualify new print processes or suppliers along the way. Depending on the demand profile, this bridge period can last for months to years. In response to this growing demand, we're expanding our part production facilities in both Leuven, Belgium and Littleton, Colorado. Leuven primarily supports European customers, while Littleton, a suburb of Denver, focuses largely on U.S. customers and has the capability to support U.S. defense work. To put numbers to this expansion, today, we have roughly 220,000 square feet of space dedicated to metal printing, covering design, manufacture, application development and support. We're adding approximately 50,000 square feet of parts production capacity in Littleton, bringing our total to over 270,000 square feet with the grand opening of this expansion targeted for the fall. From a printer standpoint, we currently have 77 metal printers in production and an additional 42 polymer printers used primarily in support of our medtech business. This expansion of both our U.S. and European metal parts production allows us to leverage the rigorous quality infrastructure that is essential to our medical business. The ability to print metal parts at the highest quality levels is at the heart of our growing metal part business. You'll hear more about this expansion in the months ahead. Before I turn the call over to Phyllis, I want to briefly address the announcement we made this morning regarding my planned transition. Today's quarterly earnings call is roughly my 100th as a public company CEO. After more than six years leading 3D Systems, I've developed a deep appreciation for this company, for my colleagues, for our mission and for the customers that we serve. I'm also grateful for the unwavering support of our shareholders, particularly through the challenging industry conditions we've experienced over the last two years. While the succession process is just getting underway, in the months ahead, I'll be concluding my service as CEO. I remain fully committed to supporting a smooth transition and we'll stay closely engaged with the Board and leadership team during this period to ensure we stay on track with the positive momentum that we're experiencing. The strategic priorities we've discussed today—focusing on our four key markets, expanding our metal printing and parts capabilities and driving profitable growth—remain the right path forward for this company. I'm confident in the strong foundation we've now built and pleased with the progress we're making as we emerge from the industry recession. I believe there are bright days ahead. And with that, I'll turn the call over to Phyllis for a more detailed review of our second quarter and first half financial results. Phyllis?
Thank you, Jeff, and good morning, everyone. Before I begin, Jeff, I want to thank you for your leadership over the past six years. Through a period of industry challenges and considerable change, the company made notable progress in strengthening its operational foundation and streamlining its cost structure while also refreshing the product portfolio and sharpening our focus on four important growth markets. These efforts have established a solid foundation, enabling us to build on our strategy moving forward. We are grateful for your continued service to the company during the transition. Thank you very much, Jeff. With that, let's now turn to our financial presentation. Before beginning our review, I'd like to remind you that we completed the divestiture of our legacy software businesses during 2025. As such, the comparisons I will reference today are presented on an adjusted basis, excluding the impact of these divestitures to provide a more meaningful apples-to-apples view of our operating performance across periods. With that, let's now begin on Slide 17. As highlighted earlier on the call, our second quarter results reflect continued progress against our strategic priorities. Before I walk through the financial results in more detail, let me start with some highlights from the quarter. Second quarter revenue increased year-over-year, driven by strong demand across our target markets and increasing sales of our new polymer and metal printer platforms. Adjusted EBITDA also improved notably from the prior year period as a result of higher revenue, disciplined cost management and ongoing operational efficiencies. Turning to our second quarter revenue performance. Revenue was $94.6 million, an increase of 1.4% year-over-year. This increase was driven by continued momentum in hardware printer sales, which grew over 40% from the prior year period and more than 20% sequentially as demand across several of our printer platforms continued to strengthen. Performance across our key strategic markets remained strong in the quarter as medtech, aerospace and defense and data center infrastructure each delivered double-digit year-over-year growth. Within the medtech and aerospace and defense markets, we had strong demand for our DMP 350 metal printers, along with healthy sales of our SLA 825 polymer printer. Both of these platforms meaningfully contributed to revenue performance during the quarter. In data center infrastructure, revenue grew more than 20% year-over-year as a result of increasing demand for metal parts used in critical airflow and thermal management components for semiconductor manufacturing equipment. Moving now to Slide 18 to cover our business segments. Healthcare Solutions remained our largest segment in the quarter with revenue of $48.1 million, up 6.8% from the prior year period. Healthcare growth was driven by continued strength in our medtech market. Demand for metal printers used by OEMs to produce orthopedic medical implants meaningfully increased during the quarter and Personalized Healthcare Solutions, our PHS business, benefited from growth in surgical planning and trauma applications. Dental revenue also increased in the quarter with steady demand for dental material sales and continued adoption of our NextDent 300 denture printer across both the U.S. and Europe. Turning to our Industrial segment. Revenue for the second quarter was $46.5 million, down 3.7% from the prior year period and up 2.4% sequentially. The decline primarily reflected revenue that did not carry forward following the closure of a noncore product offering last year as well as lower services revenue on our legacy printer installed base. As we continue to see momentum in sales of our updated printer platforms, we believe the ongoing refresh of our installed base should position us to drive future recurring products and services revenue. Looking across our industrial markets, aerospace and defense remained our largest market with space and defense applications driving sales in the quarter. We also saw healthy year-over-year growth in data center infrastructure, resulting from increased demand for parts manufacturing, along with solid growth in materials and services revenue within automotive and motorsports. Turning to Slide 19 to review gross margin. Second quarter non-GAAP gross margin was 36.7%. Gross margin performance in the quarter reflected offsetting factors, including a higher mix of hardware printer sales, less favorable materials mix and the comparison to a large regenerative medicine milestone recognized in the prior year period. These headwinds were partially offset by the benefits of prior cost reduction actions and the recognition of $2.6 million in tariff refunds during the quarter. As we look to the second half of the year, we expect continued demand for printer hardware, which should drive a growing base for future materials and services revenue. Turning to Slide 20. We continue to demonstrate strong cost management and operational efficiencies through the first half of 2026. In the second quarter, non-GAAP operating expenses were $39.5 million, a decrease of 11% from the prior year period. Sequentially, operating expenses increased by $2.9 million, primarily due to normal quarterly timing of expenses and an isolated bad debt reserve. Additionally, this quarter, we completed our six-quarter cost reduction initiative, which included actions to optimize our facilities footprint, streamline our operating model and reduce ongoing operating costs. These actions have now delivered a little more than $60 million of annualized savings, contributing meaningfully to the improvement in our profitability metrics. While this initiative has concluded, we remain focused on identifying additional opportunities to further optimize our operations. These actions have strengthened our cost structure and reinforce our disciplined approach to expense management, enabling us to selectively increase investments in R&D and capital to support our strategic priorities. Now moving to Slide 21. Second quarter adjusted EBITDA was negative $800,000, an improvement of $3.9 million from the prior year period. This was primarily driven by the benefits of our previous cost reduction actions and the recovery of tariff refunds in the quarter and was partially offset by the isolated bad debt reserve recognized in the period. Turning to earnings per share. Second quarter non-GAAP EPS was negative $0.04, an improvement of $0.02 per share compared to the prior year period. While there is still work ahead, our consistent performance over the past several quarters demonstrates that the actions we have taken are delivering measurable financial improvement. We believe these efforts are strengthening the foundation of the business and positioning the company for long-term profitable growth. Turning to Slide 22 for a summary of our balance sheet. During the second quarter, we completed an equity offering with net proceeds just over $53 million, strengthening our liquidity position and providing flexibility to support ongoing business operations and strategic investments in our priority growth markets. We believe target investments in talent, facilities expansion, printers and equipment and critical tools and technology will enhance our ability to capitalize on key markets that are accelerating the adoption of additive manufacturing. Moving to our cash position for the quarter. We ended the second quarter with $129 million in cash, cash equivalents and restricted cash. Total debt outstanding was $96 million, with $3.9 million coming due in the fourth quarter of 2026 and the remaining $92 million maturing in 2030. Now turning to Slide 23. As we conclude our detailed review of the second quarter, I'd like to briefly summarize our year-to-date performance through the first half of 2026. Looking at the first six months of the year provides a more comprehensive view of the performance of the business by helping to normalize the impact of typical quarter-to-quarter fluctuations related to the timing of customer purchases. Turning to our first half results. Revenue increased 6% compared to the prior year period, driven by strong performance across our four priority markets, each of which delivered more than 20% growth year-over-year. Within our business segments, Healthcare grew 14%, while Industrial revenue declined 1% compared to the prior year period. Revenue growth in Healthcare was driven by strong demand across the medtech business, including growth in Personalized Health Solutions, higher DMP printer sales and continued strength in orthopedic parts demand, along with double-digit growth in our Dental business for the first half. Industrial revenue performance was primarily impacted by softer demand in our consumer-facing and general manufacturing markets, the end markets most sensitive to pricing and macroeconomic conditions. These headwinds were mainly offset by strong growth in aerospace and defense and automotive during the first half of the year. Moving to adjusted EBITDA. We generated positive adjusted EBITDA of $1.3 million in the first half of 2026. This performance reflects solid revenue growth in the half, meaningful benefits from our completed cost reduction actions and continued discipline in managing operating expenses. While there is still work to be done to carry forward this momentum, we believe these results demonstrate the progress we are making toward our long-term profitability objectives. Turning to Slide 24 to conclude with our Q3 outlook. As we look to the third quarter, we remain encouraged by the positive trends we see across the business. We anticipate ongoing strength within our key markets, supported by growth in both printer hardware systems and parts sales. We also remain confident in the continuing adoption of our new denture platform and ongoing growth of our PHS business. Reflecting on our recent performance, ongoing operating discipline and expected product sales mix trend, we are providing the following outlook for the third quarter of 2026. Revenue in the range of $96 million to $99 million and adjusted EBITDA in the range of negative $3 million to negative $1 million. In summary, we believe our results in the first half of the year, combined with the breadth of our metal and polymer portfolio to address the needs of our growth markets, position us well for the third quarter. This now concludes the review and discussion of our second quarter and first half financial results. With that, I will now open the line for questions. Operator?
分析師問答
Our first question today is coming from James Ricchiuti from Needham & Company.
First off, Jeff, congratulations, and I wish you the best.
Thank you, Jim, very much. I appreciate that coming from you. I really appreciate it.
And it looks like some nice progress in the quarter. A couple of things. First off, how are you thinking about the NextDent deployment looking out to 2027, just based on what you're seeing in the market today?
Jim, I've been very pleased with the receptivity. We've been out there long enough now to start getting feedback from the end users, the patients, and the dentists. I knew it was an attractive product and the performance was good. What I've been particularly pleased with is the feedback we get on the comfort of fit the first time. From a patient standpoint, they don't have to come back multiple times to have adjustments, which is common with conventional dentures. For the dentist, that translates into productivity; they can see more paying patients a day. So the market dynamics are very favorable for dentures right now. I'm thrilled with the uptake. Now it's about marketing to ensure more dental offices know about the product, and our direct sales activity to dental labs. There are many labs, and that's both good and challenging. It's nice to have a distributed customer base so you don't have customer concentration, but for a smaller company like ours, we need effective direct salespeople and channel partners to reach those labs. Even when you concentrate the market, there are about 8,000 total labs between the U.S. and Europe. Focused down, there are a few hundred that drive a lot of revenue, but that's still a large number. I'm pleased that we're now in about 100 of those labs with our first printers. Some customers are buying second and third printers, which is the start of building momentum. I think it will take a couple of years to really scale. We've already revised our Q3 and Q4 production plan up twice this year, and we're starting to be somewhat rate-limited by electrical components that go into data centers. So we're beginning to buy ahead to ensure our supply chain supports growth in the denture market. I'm encouraged and see no structural impediments. It's a matter of marketing and sales to spread awareness. On the heels of the products we've launched, we already have a next-generation product in development to make it even faster and better. Opening up the U.S. and Europe could potentially bring a revenue stream several times the revenue stream we've had for teeth straightening. The materials are regulated—FDA and EU MDR approved—so when you sell a printer, customers are often incentivized to use your materials. I see strong quality in what we're shipping, and by 2027 and 2028 you'll see this revenue stream growing significantly. We have other growth markets as well, so it's hard to predict a single largest segment for the company, but I believe dental overall and dentures in particular can be a major contributor in the coming years. I'm excited. 2027 should be a good year and 2028 and 2029 should be even stronger.
Got it. That's great color. Phyllis, maybe a question for you. I'm wondering how we should be thinking about gross margins and OpEx in the back half of the year. If you're able to give us some color on where you see margin trends.
Sure, Jim. Regarding gross margins, Jeff mentioned we expect to be printer-heavy in the back half of the year, particularly in Q4, which is traditionally a printer-heavy quarter given CapEx spending near the end of a calendar fiscal year. On the OpEx side, I would say margins will be slightly impacted by that printer mix. Factor that in as you look to the second half. As it relates to OpEx, we've done a good job over the first two quarters, and I don't see that momentum changing. There's now stability in our OpEx performance. So looking into the back half of the year, I would expect what you saw in the first half to be pretty similar.
Jim, before you drop off, I just want to personally thank you. You've followed this company for a long time and have tracked our industry closely. I really appreciate the research and support you've provided. It's an emotional day for me, and I wanted to say thank you personally.
Our next question is coming from Greg Palm from Craig-Hallum.
Yes. Thanks, Jeff. I think you mentioned almost 100 quarterly calls. That's a pretty impressive feat and likely puts you in rare territory. I'd like to offer my congratulations on a strong career as well.
Thank you, Greg. I really appreciate that.
The timing is interesting given the hard work over the last few years that's put the company in a position to accelerate growth and profitability. Why now? Why does the timing make sense? And has the search process already started? I'm curious how long this has been going on behind the scenes.
No, the succession process is just getting underway, Greg. It could be a protracted period and may take many months to play out. I'm not leaving immediately. Regarding timing, CEO transitions are always tricky. Many companies wait to make a change when there's a real problem; we've taken a different approach. Over the last several years, we've had to reduce a significant amount of cost while maintaining R&D investment to refresh the portfolio and be ready for the industry resurgence we're seeing now. The company is well positioned: we've leaned out the organization, refreshed the product portfolio and focused on core markets. We have cash on the balance sheet to support growth. That makes the role attractive to candidates who may have a long runway ahead. I grew up in an environment where you wanted a CEO who could lead for a decade. I'm not done with my work, but the timing is favorable to hand over to someone who can carry the strategy forward for many years. I'll be here for as long as needed to support a smooth transition and to help ensure we select a credible leader who can drive the company forward.
Okay. I wanted to shift gears and talk about some highlights. You mentioned what sounded like one of the largest industrial polymer printer orders since 2014. Can you quantify that or give a sense of what it represents in terms of number of shipments? Were some of those shipped this quarter or are they future deliveries? I believe you said this was for casting for reusable rockets—can you confirm?
You have the market right, Greg. I don't want to provide order-level details, but it spans multiple quarters. It's a very large order for printers critical to the production of reusable rockets. We did make some shipments in Q2; the customer wanted immediate delivery as much as we could provide. We have more shipments ahead over multiple quarters. If we serve that customer well, this could be a revenue stream for many years. Because it's a polymer-based product, it also drives consumables revenue with attractive gross margins. It's a strong application and a model for us to follow across our core growth markets.
That helps. Regarding Q3, you provided guidance that implies mid-single-digit sequential growth at the midpoint. I wasn't sure when you last grew sequentially from Q2 to Q3, so it sounds like that large order plus other factors are contributing. Given the positive commentary across end markets and products, and recognizing you only guide one quarter out, do you have line of sight to returning to double-digit growth, perhaps next year or in 2028?
Yes, you can extrapolate in that direction. Given the last two years of severe headwinds in our industry, we've taken a conservative approach and guide one quarter at a time. That said, the trend is positive. Our core four growth markets are performing well and are long-term growth markets. We expect continued momentum. I prefer to deliver solid quarterly growth and improved profitability rather than get ahead of ourselves. So while we are optimistic about returning to stronger growth over time, we are focusing on consistent execution each quarter.
Our next question is coming from Kieran McCabe from Cantor.
I want to thank Jeff for his service to the company. I only started covering this industry a few months ago when you joined 3D Systems, but I've enjoyed learning the industry under your leadership. My question is a follow-up: in industrial, some end markets are price sensitive and weaker. Can you provide color on those markets—are you seeing light at the end of the tunnel for markets tied more closely to the economy?
Dental overall has been a good story. Historically, dental was tied to the aligner market, which has stabilized at more modest growth rates and remains a growth market. That's a solid foundational business for us. The weaker markets tend to be on the industrial side outside our high-growth segments—consumer-facing markets like service bureaus that support consumer-oriented businesses, and jewelry, which is consumer-facing and has exposure to the Middle East. Those markets remain challenging. On the industrial side, aerospace and defense is already our biggest industrial segment and has strong long-term prospects. Data center infrastructure is becoming similarly large and attractive. Parts manufacturing to support those markets will also be significant. Over time, we'll be less exposed to consumer-facing markets and will focus investments on the high-growth industrial markets, which are less price-sensitive and more strategic for us.
You had a strong improvement in adjusted EBITDA and nearly breakeven. You're guiding to a small loss in Q3. Given the $60 million of annualized cost reductions and progress, what are the levers to get you to sustained positive EBITDA and the timing? You're close—what's the nudge that gets you over the hump?
The key levers are continued volume growth and gross margin expansion. Printer sales are increasing now, and that gives us volume efficiencies. The real payoff will be material pull-through on the polymer side when those printers are installed and running. In regulated environments, materials often follow the printer vendor, and consumables typically have higher margins. On the metal side, our emerging model bridges customers from application development through parts production to printer sales. Growth in parts production is another driver of improved gross margins. So consumables on the polymer side and metal parts on the metal side are the main levers to improve profitability. Those follow logically from increased printer deployments.
A final question on data center infrastructure and energy: are you working directly with hyperscalers on behind-the-meter power solutions, or more with traditional utilities and OEMs?
We're primarily working with the traditional OEMs—companies like GE Vernova, Siemens and others that manufacture power generation equipment. We're also engaging with hyperscalers because they increasingly need to secure their own power; the grid alone is often insufficient. That has driven interest in smaller, nimble nuclear plants and other on-site power solutions for data centers. We are in direct discussions with OEMs, hyperscalers and the key suppliers that will support them. Our collaboration with Savannah River National Laboratory is important here. SRNL does significant R&D in nuclear and fusion energy, and the materials used in those applications are well-suited to 3D printing. They are high-temperature, difficult-to-manufacture materials where printing can reduce cost and improve design. We're working with SRNL to integrate advanced materials and processing in our printers and then applying that technology with hyperscalers and OEMs. This is a multi-year opportunity that could become a meaningful revenue and profit stream for us in energy-related markets.
We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.
Kevin, you've been our operator on these calls since I arrived at this company over six years ago. You've done a marvelous job for us. You represent hundreds of people who help us do what we do every day and communicate with the outside world. I want to thank you personally and all the folks who largely go unsung in getting information out on the company and helping us deliver every day. Thank you, my friend, for helping us through these calls, and I wish you the very best. Let me wrap up the call. I will be here for months to come; you may see me on another earnings call. Thank you all for tuning in today. Thank you for supporting our company, and we look forward to sharing our continuing results with you after the third quarter.
Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.