3D Systems Corporation (DDD) Earnings Call Transcript & Summary

Good morning, and welcome to 3D Systems conference call and audio webcast to discuss the acquisition of Oqton by 3D Systems. My name is Kevin. I'll facilitate the audio portion of today's interactive broadcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to John Nypaver, Junior Vice President, Treasurer and Investor Relations. Please go ahead, John.

Thank you, Kevin. Good morning, and welcome to 3D Systems conference call. With me on the call are Dr. Jeffrey Graves, our President and Chief Executive Officer; Jagtar Narula, Executive Vice President and Chief Financial Officer; Andrew Johnson, Executive Vice President and Chief Legal Officer; and Dr. Ben Schrauwen, CEO of Oqton. The webcast portion of this call contains a slide presentation that we will refer to you 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. For those who have accessed the streaming portion of the webcast, please be aware that there may be a few seconds delay and that you will not be able to post questions via the web. 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 last night's 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. Now I am pleased to turn the call over to Jeff Graves, our CEO. Jeff?

Good morning, everyone, and thank you for joining our call today. Over the last year, we've discussed in our investor calls, the growth in demand for additive manufacturing that we see ahead for our company and for the entire industry. This growth is being driven by customers expanding their use of additive manufacturing, moving from the laboratory or office environment into full-scale factory production settings. While this opportunity is exciting, the headwind is clearly emerging as customers encounter the need for a manufacturing operating system to facilitate this change. Very simply, customers need a way to bring 3D printers and related finishing, inspection and automation equipment into their factory workflow, maximizing operating efficiencies while minimizing disruption to their existing enterprise systems. Their goal is to create a flexible, highly efficient production capability that can expand and adapt to new technologies in the future, while avoiding the need to abandon their legacy enterprise systems in which most have made significant investments over many years. Given the size of our customer base, we've heard this story repeatedly across both our health care and industrial markets. So how can this need best be addressed? With considerable experience in software development to optimize 3D printing, we explored all available options, including developing a system ourselves. What we concluded is the software platform developed by Oqton, a company founded in 2017 expressly for this purpose, is by far the best positioned to fill this critical need for our customers and for all participants in the industry. We'll explain why in a few moments. From a timing perspective, given the strength of our balance sheet and from recent divestitures and our operating performance, we're in a good position to acquire Oqton, support the continued evolution of their platform and make it available to customers and all others across the industry that are working to accelerate the application of additive manufacturing in modern factory production environments. To help you understand the scope of this emerging need in the market, we believe that customers who are making this transition of additive manufacturing into production today are spending over $1.5 billion in attempting to adapt their factory ecosystems to accommodate these new manufacturing technologies and that the resulting operational performance is still rife within efficiencies that must be addressed. We see this demand growing to over $6 billion by 2025 and the bar rising rapidly for a solution that brings with it much improved performance. We believe Oqton meets these needs in a unique and exceptional manner. So why are we convinced that Oqton offers the best solution to the need. Oqton is a unique software company, founded by experts in the field of manufacturing and AI, that has spent the last 4 years developing a cloud-based platform that's focused on meeting the requirements our customers have specifically expressed. Their manufacturing operating system links to the entire workflow in which additive platforms operate from raw material to finished components. These workflows are specifically tailored to each major market vertical. Using cloud resident AI in combination with machine learning technologies, the process flow is optimized end-to-end, maximizing product yield, quality and throughput. This also provides full traceability from raw material through finished components that's essential in many critical applications such as health care, aerospace and biotechnology, just to name a few. In addition to optimizing workflow, 2 additional attributes are critical to a customer success. First, the system must be inclusive and flexible, accommodating not only a mixed fleet of printing systems that often spans metal and polymer technologies in many cases for multiple manufacturers, but also integrates post-print finishing and automation operations such as heat treatment, cleaning, machining and inspection systems, in some cases, facilitated by autonomous robotic systems. This complex mix of operations will evolve over time as new technologies are introduced, making it vital that the system is easily adaptable via plug-and-play technology interfaces. Second, the operating system must interface seamlessly with major ERP, MRP and even CRM legacy systems in order to avoid the need for complete platform overhaul. Oqton meets both of these requirements through the use of APIs that system developers can readily incorporate. In short, the Oqton platform is easy to introduce into a factory ecosystem and it brings immediate connectivity to a full range of manufacturing operations on the shop floor that are essential to the introduction of metal and polymer additive manufacturing processes. Oqton's approach to the market is very similar to the one we've taken the 3D Systems over the last year, namely a market vertical approach. In other words, they tailor the workflow to a specific market vertical such as dentistry or aerospace and then adapt it as needed for individual customers within those markets. This brings a level of customization that's very attractive to end users, while retaining the commonality need to apply AI tools broadly for process optimization. As a final component, under our ownership, Oqton will continue to operate as an independent platform, separate from the rest of the company with secure data systems that ensure not only customer confidentiality, but also confidentiality among all of the various manufacturing systems that are connected to it. This includes 3D printing systems, post process and finishing operations, inspection and automation systems. To ensure transparency for Oqton's customers and partners, an independent third-party will continue to regularly verify that Oqton data is maintained separate and secure just as it is today. We view this as an essential element for success. To talk further about Oqton's background and capabilities, Dr. Ben Schrauwen, CEO of Oqton, has joined us on the call this morning, and I'd like to now turn it over to him. Ben, it's great to have you with us.

Thank you, Jeff. I'm really excited to be here. Hello, and good morning, everyone. I'm the Co-Founder and CEO of Oqton. Before I talk about Oqton, I would just like to give a little background about myself. I've been involved in the topic of machine learning and applying it to smart manufacturing for many years. After co-founding and successfully selling a machine learning company in the late 2000, I became a researcher and professor of machine learning and robotics at Ghent University in Belgium. From there, I joined Autodesk to manage their advanced manufacturing initiatives. It is in this background of machine learning and advanced manufacturing that really led to the launch of Oqton. When we started Oqton in 2017, it was really to create a software platform to help manufacturing companies of all sizes through this period of massive disruption. Products need to be brought to market more quickly, leveraging ever more advanced manufacturing processes in smaller batch sizes and this anywhere in the world. With this in mind, we assembled a global team of the best cloud, machine learning, robotics and manufacturing experts to create what we call a manufacturing operating system. This is a new breed of manufacturing software that integrates with existing business systems through open APIs, connects all the machines and operator workflows and allow the closed loop and integrated control of the complete production environment. For the first 2 years of the company, we were only engineers and worked closely with some select partners and early customers to develop this unique software solution. We released it to the market early 2021 and are currently focused on the health care, industrial and welding industry verticals with additional verticals to come as we expand our solution. Oqton combines capabilities of product life cycle management, manufacturing execution systems, Internet of Things and quality management into a singular and easy-to-deploy cloud solution that offers full digital thread traceability and enable the use of machine learning to automate many aspects of manufacturing engineering. It integrates with existing business systems through open APIs, connects all machines and operator workflows and allows this closed loop control. Oqton uses a hybrid cloud solution with a managed on-premise component and is SOC2 certified, offering the highest levels of security and availability required by our customers. Oqton works for different production technologies such as polymer and metal 3D printing, CNC machining, inspection and robotic welding. It manages the complete production process, including any type of post processing and can be used in hybrid manufacturing scenarios where, for example, 3D printing and CNC machining is combined. Oqton manages the complete end-to-end manufacturing process from capturing customer orders to quoting, design, build preparation, scheduling, tracking and quality control across any process or technology. Furthermore, we are uniquely able to offer AI-based automation and assistance across this complete workflow. AI is often talked about as a solution for managing complex and dynamic production environments such as with additive manufacturing. However, we know from our experience that AI is usually quite difficult to set up and apply. However, Oqton has taken an industry vertical approach. And we can actually create pretrained AI models for specific industry verticals, such as health care, industrial and welding. And because our system is cloud-based, we are able to continuously improve the AI algorithms based on how our customers use the software. This approach is really advanced but actually proven. For example, it is very similar to how Tesla self-driving cars keep getting better over time. We are bringing this advanced AI and machine learning capability now to the manufacturing environment. Because AI is a bit of a buzzword, you might wonder what it actually means for Oqton. Let me expand a bit more on this. There are 3 main areas where we apply AI and our software. First, we use geometry-based deep learning, trained for very specific verticals to automate the quoting and build preparation. In dental, for example, we can fully automate the build preparation of thousands of parts a day, significantly cutting costs for our customers. Secondly, we use AI optimization technology to globally and dynamically optimize the planning and scheduling of equipment and personnel across multiple locations. This enables the typical 3D printer utilization of 30% to be pushed all the way up to 75%, dramatically improving our customers' return on investment. Finally, by integrating deeply with the production machines through IoT and tracking all of the operator work through the manufacturing execution system, we're able to detect process issues and feed back this information to really create like this closed loop, ensuring we keep continuously improving the decisions we make. Oqton is currently used by over 60 customers globally, ranging from small dental labs to some of the largest OEMs. And we are actively engaged with over 100 prospects at the moment. We have seen good market response to our solution and believe given what we hear from our customers and prospects that we have a truly unique proposition where AI can be leveraged to transform their businesses. Feel free to check out our website, Oqton.com for case studies and some really nice overview videos. We built Oqton to help organizations optimize their entire digital manufacturing environment. As a result, from the start, Oqton was created to be brand neutral and we have partnerships with many different OEMs. This allows our customers to optimize their manufacturing environment irrespective of process or brand of the machines that they are leveraging. We intend to preserve this approach and continue to serve all our customers. To further enable this 3D Systems and Oqton have agreed to keep Oqton as a separate organization with a clearly defined an externally audited data firewall between the companies. As I end my comments, I would like to mention that I'm actually very excited to be part of the 3D Systems team. I believe that we found a great partner to help us grow our business. 3D Systems is a pioneer in additive manufacturing and have made it their mission for years to help organizations transition to true additive manufacturing. I'm excited by many of the resources that 3D Systems brings us that includes their financial resources, but also their scale and expertise. There are thousands of customers around the world, many of whom use additive manufacturing for production parts. They have specific capabilities in helping customers design workflows and scale up manufacturing production. Their experience in additive manufacturing combined with our capabilities in cloud software, artificial intelligence and machine learning will create an organization that is able to help the whole of the additive manufacturing industry. I believe that through this acquisition, we can accelerate our mission and significantly grow the whole 3D printing ecosystem. Now I'll hand it back to Jeff.

Thanks, Ben. And again, it's great to have you and your team join us at this exciting time for our company and for the entire industry. Before handing off to Jagtar to discuss more about the transaction itself, I'd like to comment on our existing software platforms and plans for the future. As you know, for many years, 3D Systems has invested in software for design optimization, print preparation, process simulation and component inspection, all centered around 3D printing process itself. We believe that today, we have arguably the best-of-breed platforms in many of these areas and are continuing to invest heavily in them. Moving forward, in conjunction with the Oqton acquisition, we've made the strategic decision to open these software platforms, making them available to the entire additive manufacturing industry in a secure cloud-based format. These include our leading brands such as 3DXpert, 3D Sprint, the Geomagic portfolio and Additive Works’ Amphyon. We believe that making these platforms available broadly to the industry will further accelerate the adoption of production scale additive manufacturing across the entire marketplace. With that, I'll now turn it over to Jagtar to discuss the financials.

Thanks, Jeff. Good morning, everyone. The combination of 3D Systems and Oqton puts us in a unique position of providing our industry-leading additive manufacturing solutions to customers. And with the addition of Oqton, a software solution that ties together all facets of a customer's production cycle. We are truly excited about this opportunity and believe this acquisition can drive 3D Systems revenue run rate from software to $100 million by the end of 2025. The purchase price of this acquisition is $180 million. $106 million will be paid in cash, the remaining portion in 3D Systems' stock. The transaction is subject to regulatory review and is expected to close in the fourth quarter. After several years of development, Oqton has recently launched this product and is now ramping revenue. As a result, it is expected to have minimal revenue impact in the current year. Prior to acquisition, Oqton's cost run rate has been approximately $3 million per quarter. We expect this cost run rate to continue at current levels for the near term, excluding stock compensation and intangible amortization. Now back to Jeff for final comments.

Thanks, Jagtar. As I mentioned at the beginning of the call, the availability of the Oqton MOS will address a critical industry need by optimizing customers' use of 3D printing and other advanced manufacturing technologies, including collaborative robotics, machining, finishing and inspection operations in full production environments. This acquisition emphasizes our commitment to transform digital manufacturing and accelerate the adoption of additive. I'm excited to welcome Ben and the entire Oqton team to 3D Systems. We'll now take your questions. Kevin, let's open it up for the Q&A.

[Operator Instructions] Our first question today is coming from Sarkis Sherbetchyan from B. Riley Securities.

Yes. So look, it seems like an extremely interesting acquisition. When we look at the divestitures you did, I think the 3D Systems on a pro forma basis was, call it, $500 million of annualized sales, right? And you had a really nice net cash position. So I guess, what I'm trying to understand here is, given the, I suppose, requirement for Oqton to be systems agnostic, what does this do to your financial profile? And then more specifically, here in the near term, how do you think this accelerates your own software stack sales?

So I'd say, Sarkis, let me just comment on the strategic rationale, and then I'll turn it over to Jagtar to address your financial questions more specifically. I can tell you, we're -- as you guys have seen over the last 1.5 years, we're laser-focused on advancing additive manufacturing into production environments. That's what we're -- our mission is every single day. This acquisition was highly strategic for us because one of the headwinds that was largely out of our control was the current state of production environment for many customers and how they were struggling to integrate 3D printing into their overall workflow. And it varied by market vertical, but very difficult challenge. And as we looked around, whatever stands between us and advancing 3D printing, we want to take on and knock down. And there was no doubt the Oqton platform was uniquely positioned to solve this problem. And to solve it not only for 3D Systems, obviously, but for the entire industry. We think it will be extremely well received by our customer base. It solves a big problem for them, and it will advance the entire industry and clearly us along with it as customers adopt the platform. So we're really excited about it. We decided to go ahead and open up our legacy software systems and we continue to invest a great deal in those and view many of them as best of breed out there. And we've debated for several years about how accessible to make those to other folks in the field. And following the same philosophy we said, if we open those, it should advance the industry as a whole more quickly and obviously be a benefit to us as well. So we've decided to include those as optional add-ons with the Oqton system. And for those that would like to use it, and we believe many will. So we're excited about the demand profile we see out there. As we said, customers are spending over $1.5 billion by our estimates today trying to solve this problem and -- in really very cumbersome ways. And I think to get the most out of their printers and the modern factory environment, this tool will be extremely useful, this platform will. And then as you look at other additive platforms, I think our legacy software, if you will, will be quite beneficial to those as well. So we're excited about the demand profile. We're excited about how that will translate into revenue and earnings for us as well over time, but we're equally excited about it for the entire industry. So, Jagtar, any further comments.

Yes. So Sarkis, I'll comment on your financial question. So as I mentioned in my prepared remarks, we expect the software business within 3D Systems to grow to a $100 million revenue run rate by 2025. We're a fraction of that today. So we're obviously expecting strong growth from our software strategy. I'd point out that it's a high-margin revenue stream. We'd expect Oqton, for example, to operate at typical cloud software type gross margins. I talked a little bit about the $3 million current cost run rate. We'd expect that to expand modestly over time as we build out our go-to-market infrastructure. But over the next couple of years, we'll see gross profit cross over the expense line, and we should have kind of very nice profitability build from the software strategy. So we're excited about this.

Okay. Jagtar, I want to kind of focus in a little bit more on that angle. If I look at typical cloud software companies, assuming SaaS type model, you can typically get gross margin in the north of 80% range, call it. And as far as that's concerned, running Oqton, I suppose, independently, is there an impediment to getting to those margin levels? Or maybe on the net profit line, is this business going to run a little bit kind of more constrained versus a typical cloud-based software company? Any help you can give there?

Yes. No, we would expect the gross margin line. There's no constraint that would prevent us from operating at a typical cloud software type gross margin rates that you talked about. From the operating line, we'll be investing in the business. We intend -- we will be able to capture synergies to some expects from the back office HR, IT, finance, et cetera. So we do expect margins to build quite nicely on this over time. We'll -- synergies that we get, we'll work through it over time, and we will invest additionally in the business, but we do expect good EBITDA margins to build over time.

Next question today is coming from Greg Palm from Craig-Hallum Capital Group.

This is really a question for Ben. I'm not sure if you'll answer this, feel free or anybody else. But it seems like this is such a good opportunity, hot space, really high valuations. I guess why sell now? And maybe a better question, what does -- you went into it a little bit, but what does 3D Systems bring to the table that maybe you couldn't do yourself or maybe relative to some of the other peers in the space?

Yes. Great question. So the -- what's most exciting about this partnership is the very strong software product that 3D Systems already has like both on simulation, build preparation, it's really some of the best in the market. They're really the expert tools that people can use locally on their desktop. Combining that with our very automated cloud solution is exactly what our customers were asking for. So for us, it's like that level of synergy, like literally pushes us like forward by a couple of years if we would have to develop all of that ourselves. Furthermore, like 3D Systems is the #1 in the 3D printing space. They've been around -- like they basically invented the industry. They have an incredible customer base that will, again, allow us to accelerate really rapidly. So it's -- for us, this is like a dream acquisition where the synergies are really allowing us to accelerate to get to the vision that we have even more quickly. So super exciting.

Thanks for the nice comments, Ben. I would echo that. Greg, I would tell you, it's -- the imperative from our side was based on what we were hearing from our customers everywhere. I mean that people are really excited about bringing 3D printing into the factory and getting it into production. The reality is that introducing it into their ecosystem was really hard. And they were managing a lot of spreadsheets both from scheduling and operations standpoint. And so when we looked at the Oqton solution, we said these guys solve that problem for the customers that we're addressing all over the world. And it's a drop-in solution, not that there isn't more work to do by vertical, but it's a drop-in solution conceptually that really leapfrogs to not only solving an immediate problem, but it sets customers up for flexibility and adaptability in the future. Reality, Greg, is our customers, yes, we're very proud of our printer sales. They buy a lot of our printers. But in reality, as this thing expands in the factory, they're buying printers from a number of manufacturers. And they're doing both polymer and metal printing from a number of manufacturers. So the customers want a flexible, adaptable system that can incorporate that. And of course, we'd like to -- we like to sell as many printers as we can and support them with materials technologies we're very proud of. But in general, there was a barrier to basically everyone in the industry advancing more quickly into production. And so it solves a problem for us. It solves a problem, I believe, for the entire industry. And it's a really good match technically. So we've been very thoughtful in how we're going to work with Oqton. We're going to maintain them as an independent platform for the benefit of the entire industry and go to great pains to make sure customers and partners in the software are comfortable with the data security and management. That's accomplished in many other industries today. And we think their model is going to be very, very successful in addressing a problem we all face right now.

Great. I appreciate that color. Maybe just last one, I wanted to follow up on a previous question. So Jagtar, you talked about some very nice profitability build over time. The math obviously implies a modest amount of dilution at least this year. At what point do you think that this hits breakeven and even flips to accretion? Do you have a time line in mind? Or is it just too early at this point?

It's a little early. I mean a rough time line would be over 24 months, but it's a little early for -- we'll have to see how the next few quarters go.

Next question today is coming from Wamsi Mohan from Bank of America.

I wanted to just follow up on sort of just the decision on owning Oqton versus partnering. I mean a lot of your peer 3D companies are partnering with Oqton. They -- it seems as though you're going to keep that structure very much intact. So that is a plus for the industry. But why is it, Jeff, that you wouldn't just partner with them. I mean you are putting a significant amount of capital over here in this investment. I understand that you see this as something that could accelerate your software revenues over time. But I'm just curious like when you look at the calculus of achieving $100 million in software sales by 2025, how different would that have been had you partnered with Oqton versus actually buying the asset?

I think, Wamsi, the synergies this brings from a knowledge standpoint are really very strong. Obviously, you state the obvious, and we consider this in any partnership. We have a lot of different partnerships in materials and other technology areas that work very well. This is a partnership where with the AI knowledge that Oqton brings to the table, we could certainly leverage that just basic knowledge into our software platforms. We can leverage their use of the cloud into our software platforms, again, making them available not only for our traditional customers but for the rest of the industry very effectively. It's hard to get those kind of technical synergies when you're completely separate companies. At the same time, it's a balance because we want folks -- customers and partners to be comfortable using the Oqton platform from a data security standpoint. So we are going to maintain them as independent platform. But from a -- I think from a technical synergy standpoint, it can be very beneficial to us and also to the Oqton folks in terms of the knowledge we bring around additive manufacturing. Ben, would you have any other thoughts on that?

Yes, I think also one of -- the most benefits can be gained with the Oqton platform if there is extremely deep integration with the machines and the processes themselves, that's where the AI and automation we can offer really starts to shine. And I think being part of 3D Systems will really allow them to do in the most deep way integrates with our platform offering really like the machine experience of the future, like that's what we really see. So every time when software and hardware really comes together very closely where you can drive processes and capabilities that were never feasible before. And I think through this acquisition, this is something that is now much more easily achieved by 3D Systems.

So that's at the heart of it, Wamsi. I think that will advance the Oqton platform, it will advance -- certainly advance our software platforms more readily. And then by opening our software platforms up to the entire industry, it spreads that benefit across many others. So basically, anyone that would like to use it. So I think it's a win not only for us and for Oqton, but for the entire industry.

Okay. And if I could just follow up on that. When I think about all the comments that you've made regarding what the revenues potentially could be next year on the cost structure, which was helpful to understand. It seems like -- I'm ending up at roughly a mid-30% growth rate for software for 3D Systems CAGR to get to your $100 million exiting 2025. Is that about right?

That's about right, Wamsi.

[Operator Instructions] Our next question today is coming from Jim Ricchiuti from Needham & Company.

Most of my questions were answered, but I was just wondering if you can spend a little bit of time talking about the Oqton business as it relates to polymer versus metals. Do you have more exposure in one market versus the other? And I wonder if you could just elaborate a little bit more on that.

Well, I'll offer a comment and then Ben, maybe you want to follow up here as well. But no, I think, Jim, the simple answer is no. It's very well distributed between metal and polymer solutions. And clearly, our historic software is in both areas. And I think the Oqton platform works extremely well with both basic technologies, both polymer and metals. And the nice thing, Jim, is the post processing operations for those 2 technologies can be much different. And the Oqton platform, with its flexibility, will allow folks -- customers to incorporate the post-print finishing operations that are specific to the components they want to make. So if they're polymer-based cleaning operations and other prep operations, if they're metal based, some of the metal finishing operations, machining, cleaning, all of that plus inspection technologies, which again can vary by basic technology type. So this flexibility of this platform allows you to not only adjust it to both printing technologies, polymer and metals, but also incorporate an endless variety of post-print processing and that mix can change over time. So we have many customers that start with polymers and they're running on that path, but their fastest growth area is metals now. And they want a system that can very smoothly adapt from one to the other in a changing mix and, Jim, from multiple manufacturers, right? We have a market share we're proud of in the industry, but many other folks have good market shares as well with different specific technologies. The Oqton platform can incorporate all of them and an ever-changing mix. So Ben, anything to add to that?

Yes. So like maybe a bit more technically. But for example, in polymers, a big cost driver for polymer parts is the engineering work required to do the build preparation of the parts before they go to the printer that like in the polymer use case, Oqton's AI automation can really drive down the cost of that initial like engineering work to get to actually print parts. Where in metal use -- like in metal scenarios, the #1 issue we hear again and again is about traceability really being able to fully track end-to-end, everything from which powder batch, operator training, which machine was used, machine calibration, all of that is super critical to be able to deliver parts with the quality requirements needed in -- like in medical and in aerospace. And like Oqton covers all of these use cases like in one singular platform. And that's really what our customers love about. It's like one piece of software that really solves all these problems for them. And so that's how we look at it.

Jim, just one final comment. That's the view from the shop floor is exactly as Ben described. You've got this host of disparate technologies you're linking together. And then there's the other end of the equation that you're trying to link into an overarching ERM or CRM platform on the ERP platform that customers have often invested tens of millions of dollars in already. They want a system that can plug into those overarching systems and not require a lot of reinvestment on their part. So that's the other half of the beauty of the Oqton platform is it's easy for customers to integrate and it plugs in really nicely to their factory floor and can evolve over time. So anyway, long answer to your simple question, Jim, but yes, it can do polymers and metals.

No, that's helpful. And I'm just wondering, as you open up, Jeff, your other legacy software business and the combination with Oqton. How do we think about the go-to-market initiatives for this business? I wonder if you could elaborate on how you see that, whether investments have to be made in building out the sales marketing organization and whatnot?

Well, there's no doubt. Oqton will get bigger over time. So the investment in Oqton's sales force and sales support has to continue over time because they'll have a direct path to the customer base and to other partners around the world that will use the platform. In terms of our own -- our historical software and investment, we have not built out a large sales team. This gives us a very nice way to bring our software to market as optional add-ons to the Oqton platform. We will have some dedicated resources that will also work directly with other 3D printing manufacturers if they want to license the technology. So we'll have a modest cost there, Jim. But I think leveraging what Oqton is doing and using our platform is basically optional bolt-ons to the Oqton platform will also be a really nice channel to market.

Next question today is coming from Noelle Dilts from Stifel.

My question actually ties into the question that Jim just asked around opening up your legacy software. So I'm just curious if there have been any sort of changes that you've made to the software or that you anticipate making as you open up that software to the industry? And second, if you could kind of speak to as you look forward over the next 5 years and think about the entire software platform, what you'd like that to look like and sort of what you envision the offering to the industry? What you expect or targeting to bring to the industry in terms of that holistic offering, that would be great.

Yes, there's a lot in that question, Noelle. So -- and to answer your first question, let me go back to what your first question was in that. In terms of how our software will evolve now, I think the Oqton expertise in both cloud hosting, cloud resident software applications and AI will continue to make our traditional legacy systems better and better over time. I think the knowledge and expertise these guys bring to the table is absolutely outstanding. So I think our legacy software systems will become easier to use. I think their raw capability today is outstanding in many cases. And we've not made that capability available to other people. So now we will open that up. I think the basic capability people will find outstanding, the ease of use and its integration with cloud-based AI will become better and better over time. So that's an answer to your first question. What does our portfolio look like over time? I think we're taking a very flexible approach on where we can really add value. As Ben mentioned, some of our current systems before the Oqton acquisition have been really good build prep systems. We have our 3DXpert system for metal printing. We think it is the best in the world. And some of the Geomagic software, which really spans a number of operations around additive, including inspection and control at the end of the printing operation. Those will undoubtedly continue to evolve. Where we can add unique value with our 3D printing software, we'll continue to do that. Where we can leverage other software platforms out in the world. That's great. We'll do that as well. But I think we'll have a core range of platforms that are really valuable to the industry. And then you've got -- on top of that, you've got the Oqton platform, which will help move all additive manufacturing into production much more readily for our customers. So that's probably not as specific as you'd like to hear it, but it will be an evolving strategy for us, Noelle.

We reach 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, Kevin, and I want to thank everyone for joining us today and for your continued support of 3D Systems. A replay of this webcast will be available after the call on the Investor Relations' section of our website. Have a good day.

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.