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

Good afternoon. Welcome to 3D Systems Investor Day. We're very excited to have you all here with us in Detroit. The slides we present today are available on our Investor Relations website. For those on the webcast, you will be able to submit a question through the webcast portal. We will have a Q&A session at the end of the main presentations. Refreshments will be available in the Ballroom C throughout the session, and we will have a short break around 2:30 p.m. Before we begin, I want to remind you that today's 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 filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this event, we will discuss certain non-GAAP financial measures. In our slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Now we'll start with a brief video before we kick off the presentations. Thank you. [Presentation]

Good afternoon. I'm Jeff Graves, President and CEO of 3D Systems. Let me add my thanks to Melanie for those who made the trip here to Detroit to be with us live and for all of those on the -- that are joining us on the web today as well. It's a pleasure to have you all. I'd tell you, it's a tremendously exciting business. It's a tremendously exciting industry. And the pace of change has never been higher. This month, May, marks my 2-year anniversary here at 3D Systems. And I've never been more excited about the future for our whole industry and certainly for our company. Before I start with my prepared remarks, I just want to acknowledge 2 people that are here a bit on the fly, but here to attend. Our -- the Chairman of our Board, Chip McClure, is sitting near the back there. Many of you that have followed the company for a long time have said kind things about the progress we've made in the last couple of years. I want to tell you, and particularly as a public company, those kind of changes are never possible without a strong support of the Board. So Chip was, in detail, involved in recruiting me to 3D systems and certainly leads the Board of Directors in support of everything we're doing today and really has been a great team member in driving the change that you've seen in our results. And then Dr. Steve Klasko, we announced this morning that we're forming our first Medical Advisory Board, and it's really driven by the pace of change in our regenerative medicine business. And for those of you who can attend dinner this evening, it is truly remarkable technology. The markets are evolving. It's difficult to predict some details on timing, but the pace of progress is exceptional. And we're to a point now of maturity where we could benefit from a Medical Advisory Board to advise us on full spectrum of issues from -- still from some scientific issues to regulatory approvals to partnerships around the world. So Dr. Klasko, I would encourage you, please read the press release. I would take my entire time to read Dr. Klasko's credentials and him joining us as the Chair of the Advisory group, but tremendous background. Suffice it to say in 2020, Steve was named a Distinguished Fellow of the Global (sic) [ World ] Economic Forum who meets in Davos every year. I'm sure most of you know that forum. It's business and government leaders from around the world to get together to talk about the future. Steve was named the first Distinguished Fellow that comes and talks about the future of health care and particularly how technology can and should impact that to deliver better-quality healthcare to people around the world. So Steve, thank you for joining the calls here. We really appreciate it. Thanks for being here today. So with that, most of you, in the room, follow the company in some detail and you hear from me all the time. So I'm going to kick this off, and then I'm going to hand off to the management team, who you don't hear from very often, but who really make these changes happen. So I'll talk about the team. We designed the agenda to actually go through exactly how we view our company and how we run our company. So we're going to talk about our 2 business units. Industrial and Healthcare Solutions, starting with Healthcare and transitioning to Industrial solutions. So Menno Ellis and Reji Puthenveetil lead our businesses. They're out in front of the customer and the trends every day and really defining our priorities and in the technologies we develop and how we go to market. And then we're going to move on to the technology section. You're going to hear from Ben Schrauwen and David Leigh. Ben about software and the remarkable progress that's in store for us in our software -- our suite of software options through Oqton and then David on our hardware and materials technology evolution. And then Wayne Pensky is going to bring it all together. Our interim CFO is going to bring it all together into our financial model for the future, and then we'll open it up for Q&A. And I know many of you are on a rigid schedule in the back end of this meeting, so we will stick to the timing, try to maybe even beat it a little bit. But we'll open it up for Q&A to those in the room and on the web. And then this evening, for those who are here in-person, I would truly love to see you come to dinner with us tonight and learn about our regenerative medicine efforts. They are truly remarkable. They're -- we're plowing new ground in science every day. It's moving into a phase where now it's increasingly engineering issues and creating human -- basically human body parts. That's how fast the technology is moving. And if you catch the subtlety, it's transitioning from science to engineering. And engineering problems are solvable. And so that's the phase we're moving into to be followed by traditional studies and clinical trials. But you'll hear a lot about regenerative medicine tonight and some remarkable technology. So the folks on the top, you're going to hear from directly today. The folks on the bottom are -- some are with us, some are not. Chuck Hull, who was on the video, remarkable man. He invented 3D printing back in the late '80s and continues to be our Chief Technology Officer, focused today on regenerative medicine, which has really been his baby for the last 4 years. And he is still the chief architect of that work going on in partnership with United Therapeutics and work on our own as well. Andy Johnson, our Chief Legal Officer, but also a great partner in all the divestitures we've done. And he has led a lot of those divestitures and made sure they got over the goal line in a remarkably short period of time. And now as we've moved more into an acquisition phase, Andy has led a lot of that activity as well. And Phyllis Nordstrom, the newest member of our team. Companies live and die by their culture. And the culture of our company, we are looking at every day, we're refreshing key elements of it. Phyllis is really the architect of that and the owner, as we increasingly look to attract talent, diversify the employment base and really drive for a faster and faster pace of creation. So as I said, May marks my 2-year anniversary. If you look back on our history, the company was founded in the late '80s. And our company and most companies in this space really look at themselves, in my opinion, as making printers and selling printers or developing materials and software and selling those, almost as business units. And that's how our company was structured when I arrived. Going forward, with the state of adoption of additive manufacturing now, I think it pays to look at your company much differently. So in the summer of '20, we turned the company 90 degrees, if you will, and redefined ourselves as having a Healthcare business and an Industrial Solutions business, okay? And why did we do that? It's so customers in the health care industry, customers like Johnson & Johnson or Stryker or others, could come to our health care business and we would understand what they meant about quality, delivery, FDA-approved processes. We would know how to implement solutions for them that were appropriate for health care businesses. You don't get that by simply selling printers or selling software to those guys. You have to become a health care company yourself. Similarly, on the Industrial Solutions business, very much the same in aerospace and others. When your customer comes to you, they want you to understand their business very deeply, so you can provide a comprehensive solution. And that also ends up being a very good business model for the company providing it. So we reorganized the company in mid-20. This is how we go forward. You'll note the dots down there, bioprinting and regenerative medicine, those are emerging businesses, if you will. Some of that may find its way into our current health care business and just expanding the scope of our current health care business. It's also equally possible that regenerative medicine will be a business in its own right with its own customer base and such and infrastructure in the years to come. So those are emerging businesses. If you look today, we're reorganized, we are restructured, we are lean, we are faster than we've ever been before, and we've got an excellent balance sheet to support future growth. Importantly, we're delivering that growth today. If you look at our quarter-over-quarter results, we're growing at double-digit rates organically. We're generating, I'd call them, respectable margins and margins that we expect to improve. And you're going to hear from Wayne about that later on. So I'm pleased with our position. We've got a long way to go, and we've got a very exciting future ahead, both on the top and bottom line performance. So all companies generally start with their key numbers, just facts. And I'll do the same thing. So today, we are structured as we want to be. We're the size we want to be. And we're growing from here. So we're just under 2,000 employees. We're very proud of our patent portfolio. We've got over 1,000 patents issued to the company. We've got 80 application engineers. I'm going to keep coming back to application engineers. You heard it in the video, if you were listening, I'll keep coming back to the key role they play for us and I think a real differentiator in our company. We serve today 20 market segments across Healthcare and the Industrial space, and we have the largest sales and service team in the entire industry. And why is that important? Customers these days, especially large global OEMs, want you to take care of them from the moment they have an idea until they have an installed fleet of printers that are running for the next 20 years. So we have the infrastructure to serve that. To provide the solutions we provide, we must have the broadest set of technologies in the industry. That means metal to polymer, which we're committed to. We have 7, basically, platform families. You're going to hear more about that from David Leigh. We've developed 2 major bioprinting platforms to grow from, 1 designed for the laboratory for basic research and pharmaceutical use and the other for printing human organs and soft tissue for the human body. We have over 130 proprietary materials we've developed over time, and we continue to accelerate our pace of development. Those are materials that create exceptional value for our customers and obviously bring benefits to our company as well. And we have the most extensive software platform in the industry, bar none. We've opened up those software platforms to our competitors and to all of our customers to use as well, because we think it's for the good of the industry, and it obviously is good for our company as well. And same with materials, the direction it's headed. So those kind of things that accelerate additive in general, we're trying to provide to the industry in whole. So what? So what does all of this mean? If you look at the results of those facts, today we serve 30,000 customers a year, more customers than anyone in the industry for production applications, over 30,000. We've sold in our history over 35,000 printers. But note, over 20,000 of them are running today in production. Those 20,000-plus printers consume 4,800 tons of proprietary materials a year, 4,800 ton. That's 42 carloads, train carloads of materials a year. And as of last month, those printers are churning out 1 million parts per day, over 1 million parts per day. The last time I quoted that number a few months back, it was 700,000. Today, it's over 1 million parts per day in production around the world. You're going to hear more about the fleet of printers we have running and the distribution of customers who are running multiple printers. So what does all of that mean? As additive manufacturing moves into true large-scale production environments, we've become the most knowledgeable and experienced company in the world with making that transition happen, understanding the issues around it and supporting customers as they implement fleets of printers. So I think we're very well positioned for the future. I think everybody knows what an exciting growth market that additive lives in today. You can look at a range of studies, it's somewhere around $15 billion today in size, the additive industry in total, growing to something like $50 billion in size by 2026. So a very fast-growing market, very large market. What's driving it? You're all aware, design flexibility for designers in your customer base. Mass customization is something that's increasingly being referred to. So making large quantities of parts, but with every part or collection of parts being customized for the application, whether it's an engine or an orthopedic implant or even a human body part. Supply chain flexibility, never more important than today, as we've seen in the last 2 years; and low volume parts, faster and with faster product cycles as well. I used to view -- when I arrived, I viewed this industry as in production, primarily is one that lent itself to low-volume complex parts. Completely different viewpoint today. I think that's a great application for additive. But increasingly, what we're seeing is our customers coming to us that produce high volumes of parts, but those parts change in design frequently or there may be a variety of SKUs, a large number of SKUs they have to produce. For them to do it with traditional manufacturing techniques, certainly it's possible in many cases, but the cost in tooling and inventory is exceptionally high. So the flexibility they get with additive and the economic benefits are substantial. Markets we serve, you're going to hear a lot more about this from Reji and Menno in a few moments. aerospace and defense, automotive are 2 of the big ones, obviously, for Industrial. Healthcare between dentistry and other medical devices as we refer to it, that encompasses both personalized health care where we're designing custom parts with a surgeon to repair skeletal systems as well as medical device implants like spinal implants. Things of that nature, all fall in our Healthcare business, our med device segment. But very exciting to me are these emerging markets in regenerative medicine. They, by definition, lend themselves to additive manufacturing. It's just the precision, the intricacy, the materials are all different in detail. The basics are the same, though. You're just designing something for the human body. So how are we differentiated from competitors? We broke it simply into large competitors and small competitors in this comparison. One theme, if you don't walk away with anything else from my introduction, I want you to understand how our business works. We have -- we wake up every day focused on applications, what applications benefit our customers the most and which markets drive the most value from those applications. So we're application-focused. We can be application-focused because underneath that, we have the broadest range of technology to support it, from printers to materials to software. So we bring those applications to life with customers every day. And when they like what they get, we can scale it, demonstrate the validity of manufacturing, the economics of the manufacturing, define the workflow. We can even move it into limited production. And once it exceeds the volumes that we produce, we enable them to scale it up. So we enable either the OEM themselves or third parties to scale the manufacturing process. So through that life cycle, we support the customer. Starts with applications and moves then to the basic technologies that go into those applications. Earlier this year, we meant to kind of crisp up our strategic focus. Everything you're going to hear today is organic. Everything that we're talking about today is organic. We're not talking about acquisitions. Frankly, speaking, acquisitions for us are purely opportunistic at this point. Everything in our future basically is under our own control, and we have the balance sheet to invest in it. What does that really mean our focus is? First of all, that blue box in the middle is critical day-to-day execution, managing supply chains, managing the pace of change with your customers. It requires you to keep the eye on the ball every day. But from a strategic focus standpoint, on the middle of the page on the right, we basically say there are 3 strategic initiatives for our company that will make us successful. One, on the far left, you see new solution revenue, and that's that, application focus and bringing our technologies to bear to deliver the applications. What it drives is the development of new printers, new materials, new software guided by the application that's trying to be solved for. Okay? So the application defines what we do, and then we adopt our technologies to support that. Recurring revenue is an enormous lever in this business for driving both top line and particularly bottom line performance. So we focus on driving new solution revenue for the top line. We then also focus, in parallel, in recurring revenue. That's developing materials and software to support the customer on a recurring basis after you sell printers and then providing services. Increasingly important when customers get large complex fleets, and run them for 20 years, in some cases 24/7. And then finally, for our company specifically, manufacturing excellence. We've had a fairly fragmented approach to manufacturing. Frankly speaking, we've got a lot of upside for ourselves and really crisping that up, make sure we have a really tight manufacturing strategy. Customers today need printers on time. They need us to deliver materials and software on time. It all gets back to supply chain and manufacturing. So you'll see us work a lot. It's a little -- it sounds a little mundane, but there's a lot of gold in doing that, both on top line growth and on bottom line margin improvement. So strategically, new solution revenue, recurring revenue, manufacturing excellence, all driving gross margin expansion. And you'll hear about our goals from Wayne at the end. I'm going to repeat it one more time with this graphic, because I don't want you to forget. We are an application-focused company. If you look at our website, you'll see some really pretty views of an enormous number of applications that we're delivering every day. You're going to hear about it from the 2 business leaders that follow me. With that application focus, we bring the technologies to bear to solve them, the hardware, software and materials, brought together to solve applications for key customers and key market verticals. And we have confirmed, we solve those applications, customers expand their application envelope. We sell more product, we sell more recurring revenue. It works each time we go about it, and it's why our organic growth rates today double digits. Again, you're going to hear about various printer models, a range of software we have. The process we follow to drive growth is basically laid out on this page. You go through an exploratory phase with a customer. Often the customer is coming to us to say, "We have an application we think will work wonders with additive manufacturing. Is it viable? And if so, what are the economics around it?" We have 80-plus application engineers involved in that exploration and innovation and development process upfront. Over 80 application engineers, largest number and best in the industry. They work with customers in detail to explore and bring to life those applications. We model the economics. We print it on a reproducible basis and say, yes or no, and we show them the economic model. If they like it, they say, could you -- most often, they say, "Could you print more of those, tens or hundreds? Could you print more of those?" And we print them and we sell them to them. And we demonstrate over and over, the workflow works, the economics are validated. At some point, volumes continue to rise and we say, "Now, you guys need to scale." So we transition the technology to them, the process workflow. They buy printers, they buy consumables, and they scale it or a third-party scales it for them. So that's this process: exploration, innovation, development, validation, critical thing within our own 4 walls for the customer, and then produce the product and scale with the customer. That's the process we follow. A laundry list of logos, most of which we can't show. So this chart gives you a flavor by market of the types of people we serve. Many, many more, who are a bit shy and don't want their logo shown. Culture is a huge deal to our company. You want to know a key piece of why we've accelerated in terms of our top line growth and our financial performance. It's we're driving cultural updates, if you will. So we have a huge push on attracting experts. And this industry has -- we're blessed in this industry with a number of people that have been at it for some time, largely in some cases, since largely the beginning, who have served a variety of roles, maybe a variety of companies. We're trying to attract many of those experts to our company. They bring with them seasoned talent. And in parallel, we're hiring folks out of school. We're grossly expanding our internship programs to bring young talent into the business. So that's a pipeline of talent coming in. But in order to keep them and keep them excited -- the work is exciting in and of itself. But these days, you must create an environment where people enjoy coming to work. So a culture of inclusiveness, a culture of diversity, acceptance of different ideas, it's great business, because these folks have extremely creative ideas. Many of the young people we hire today grew up with 3D printing in their high school or middle school laboratories. They've been exposed to it for a long time. They've imagined for a long time what it could do. So engaging them, when they graduate from college or even while they're in college, and putting them in an environment that they really enjoy, their colleagues and the culture that you're growing means the world to them, probably as much or more than money, quite frankly. So our retention rates are, in my opinion, very strong right now in this economy where it's hard to keep people, because the work is exciting and the culture we're creating, I think, is very attractive. And finally, we're modernizing our ways of work. Sustainability, huge initiative for all companies, obviously. I just talked about some key elements of people, diversity and engagement of employees at all levels. Climate is a huge deal as is elimination of waste. It's a huge deal for the company itself, making sure you don't pollute the environment and so you're environmentally friendly as a company. In reality, we largely assemble products. We don't have a lot of chemical processes or emissions, but we do enable our customers to reduce theirs. So a big impact we have on society is helping customers to reduce waste and improve the climate or avoid degrading the climate. Last chart. So investment thesis. Why should folks invest in 3D systems along with Additive Manufacturing in general, 3D systems. We are a roughly $600 million company today. We have a serviceable market of over $6 billion, plenty of room for growth. And in that market, we're delivering double-digit growth today on the top line. How do we do it? Those 3 points right there say at all. We have an extremely strong application focus, if you haven't picked that up already, a strong application focus. We have the broadest range of hardware in the industry, hardware, software and materials, broadest range of technology in the industry, and it's critical to our success. It's like tools in the toolbox of the master mechanic. The master mechanic is the application engineer. The tools are printers, they're materials, they're software tools that they bring together oftentimes in a unique way to solve a customer solution problem. And finally, we have the scale to support customer needs from the first time they have an idea in the sales process until they've got an installed fleet of printers, and we service them for the next 20 years. We've got the scale to support even the largest OEMs right now around the world. So application focus, broadest range of technology and scale. I think with that, if we invest well and run the company well, we've got a tremendous future ahead, one in which we believe we'll deliver double-digit organic growth and expanding margins for years and years to come. And everything you're going to see for the rest of the afternoon does not take into account anything you're going to see this evening with regenerative medicine, okay? It's all organic, and it's all to do with our current business growth. What you'll see tonight is a brand new field, if you will. Okay. With that, I'm going to hand off to Menno Ellis, who runs our Healthcare Solutions business. Menno?

All right. Sound active? Wonderful. Hello, and thank you, everybody, for joining online and here on purpose today -- in-person today. What I'll do is I'll start off with a quick overview about the Healthcare Solutions group, so you know who we are; and from there, transition pretty quickly into what we see as kind of the critical challenges in the health care space today and how our technology and our solutions can help address those. And really, that narrative is based on kind of 4 fundamental drivers. First, the fact that you can take medical devices that historically have been [ casting machine ] and make them perform better or more cost effective by 3D printing, then you can take those benefits and amplify them further by incorporating them into a personalized medical treatment for a patient, working initially with OEMs that makes those devices, and then subsequently bringing those benefits even closer to the patients by engaging directly with the point-of-care providers who are administering the treatment. And then finally, I'll close with a little bit of a glimpse into the future on what we're doing on the bioprinting side, particularly with respect to supporting laboratory research and accelerating drug development time lines. So we've been in this business with 30-plus years of experience in the health care side. We've talked about personalization. I mentioned that a minute ago. We have done over 150,000 patient cases, again, matched to the individual patient within our organization. We've also manufactured over 2 million medical devices, and this is just within our facilities, not counting the millions upon millions of parts that have been manufactured by some of our customers with our printers, software or materials. We've got 4 ISO 13485-certified facilities, 2 in Europe, 2 in the U.S., which basically means that we are certified and clear to make medical devices in those facilities. And then we've developed a number of devices and worked with our customers on getting more than 100 devices cleared by the FDA and by the European regulatory bodies. So we've got a tremendous amount of regulatory experience within the health care space as well that we can bring to bear. So we essentially operate in 3 markets today, orthopedics, craniomaxillofacial and dental. And so what that means is that we can treat just about any body part from shoulders, hips, knees, ankles, spines, cranial restorations, facial restorations and a number of indications within the dental space, aligners, dentures, crowns, bridges and so on. Big markets, exciting markets, growing markets. But we're always looking for those new opportunities. And so one of the newest ones that we've identified and cleared to begin operating is in radiation oncology. And I'll spend a couple of minutes later telling you more about that. This has been a good business for us from a financial performance standpoint. It's a business that grows about 20% year-over-year for a number of years now and reached $274 million at the end of 2021. A little more than half of that currently comes from our dental segments and then the remainder from the medical device side. And you can see, we've got some pretty good addressable markets that we think we can engage with and continue to penetrate. On the emerging side, we've got the bioprinting. You heard Jeff mention it for a little bit. And there's 2 chapters to the story. The areas that I'll cover is talking about what we can do with the laboratories and specifically engaging with the pharmaceutical companies to help get drugs developed and out to market faster. This evening, you'll hear from my colleagues, Katie and Bagrat, who are going to be talking about our bioprinting capabilities applied to regenerative medicine and how we have some really exciting applications for in-body placements and applications. Like I said, we've grown -- last year was a great year for us, growing at 40%. This year, up to $64 million as of the end of the first quarter. So if we transition to what's going on in the health care space today, toughest thing that gets a lot of headline is cost, escalating cost. A couple of studies have looked at this. And so if you look at about data from about a decade -- over the past decade, surgical care has almost doubled in cost during that time period. And you see inflation within health care basically running at twice the pace of the CPI. So very compelling situation there. Then from a patient outcome standpoint, if you're in the U.S., you're in pretty good shape, right? Our health care is generally pretty good. But even here, you're talking about a hospital readmission rate of 14% every year. If we zero in then specifically on the orthopedic side of things, we're seeing about 1 million hospital readmissions occurring after an orthopedic surgery of some kind. Then you've got the usual demographics that people think about, right? First of all, aging populations everywhere. And then the fact that all of us, as we get older, we have great expectations about maintaining our quality of lives, continuing to be active and so on. So all these things together really produce quite a bit of pressure and stress on the health care system overall. Good news is there's ample research out there that basically corroborates that we can make a significant positive impact on these challenges with 3D printing. We can improve surgical outcomes for the patients. We can save time, save money in the operating room and also enable a number of new solutions that can address a patient's needs that oftentimes go unmet. So where do we start? So we'd start with 3D printing better medical devices. If you think about the way medical devices, particularly implantable ones, have historically been made, it's through milling, machining or casting. By 3D printing either the entire device or key components of it, we've proven that we can lower the cost and design them in a certain way with a level of detail that facilitates bone regrowth once those devices have been implemented into the body. Why is that important? Well, the faster the bone regrows once that device has been implanted, the faster that implant becomes stable within the body, people feel better, get comfortable, back on their feet, out of the hospital, oftentimes with less discomfort and leaving with joints that perform better than their machined or casted alternatives. And this is purely by applying 3D printing capabilities and print technology to the manufacturing of this. We haven't personalized anything yet to the patient. We'll come to that, and that's going to help us further. But just by doing this, we can have a tremendous impact. And so we, as a company, have brought thousands of products to the market by doing this. And so specifically, how do we do this? This goes back to what Jeff mentioned earlier about our application-driven approach, right, plays out extremely well on the medical device side as well. Our application engineers engage early on with our customers to design the devices, validate them, test them, support them through the regulatory process, and then we start producing. And we've got 2 factories, 1 in the U.S., 1 in Europe, where we basically start putting these parts into production within our own house, validate the workflow, making sure that the yields and efficiencies are what we want it to be. And at that point, we'll go back to the customer and say, "All right, this is now ready for prime time. We can help you set up with printers, materials, software, so you can take this manufacturing in-house. Or if you would like to leave a portion or frankly all of the production capacity with us to fulfill on an outsourced basis, we can do so as well." So giving lots of flexibility in that regard. So what I want to do next is introduce you to a couple of gentlemen that really tell a very good -- give a very good explanation about how this model works and what their experience has been of working with 3D Systems on this kind of flow. [Presentation]

Thanks. it's a great story. Very current working relationship with these guys. And it also speaks to a little bit of what differentiates us in terms of being able to work with multiple parties together on complex technology and guide the adoption and guide the development every step of the way. So that's on 3D printing overall and kind of the benefits of utilizing the technology in the production of medical devices. Where I want to go next is, if you say, let's take this technology and these benefits and amplify them even further by starting to personalize the treatment to the individual patients. And so when you're talking about personalizing the treatment, there's a couple of components to it. First, it's taking data from the patient, the patient-specific anatomy, bringing that into our software and, together with the surgeon that performs the procedure, go through in a virtual environment and basically start planning and reversing that surgery that's going to take place. Together with that, we can then produce anatomical models for the surgeon so that he has physical references of the procedure that's about to take place, that not only he can use in his office as he prepares, but can bring them into the operating room as well to have real-time reference pieces on there. So the next thing you can do is using that same patient data, we develop specific surgical guides, right? Basically, different devices that will be applied to the part of the body where the surgery is taking place and allowing us then -- allowing the surgeon then to have very clear directions on where to cut, where to drill, et cetera. So taking a lot of the, let's say, the guesswork almost out of it and having very clear guided procedures to follow with those devices. And the final component, in some cases, it actually makes sense to customize and develop a custom implant for the patient based on their particular situation, based on their anatomy. And so we will apply this methodology across the different market segments where we operate, so craniomaxillofacial, orthopedic, radiation oncology and also in dental. So we've got about 2 decades worth of doing this level of planning work. And again, it starts by taking that patient data that we get from the radiologists at the hospitals, loading that into our software, engaging, planning with the surgeon, and then developing the devices that are going to be used in the procedure, and then bringing them to the hospital where they're going to get utilized. So that skill, that ability to plan is one that we think we're very proud of. We have a very differentiated place in the industry with that. And so we're constantly looking for new indications and new areas where we can apply that. And so we've got one here in radiation oncology that we just announced that we're going to be starting to go to market with. So radiation oncology, this is a story about cancer. Cancer rates are high, unfortunately. And as part of cancer treatment, about half or so of the cases involve some form of radiation. Now in order for radiation to be applied and administered correctly to the customer or to the patient, you typically would use an accessory of some kind that basically makes sure that it's placed in the right place, area where it needs to be, protecting areas that shouldn't be exposed to radiation and modulating the right level of intensity. The legacy way of doing this is relatively low tech. It's that picture that you see there with that red circle drawn through it, and it's a rubber and plastic flap that the technicians or operators at radiation clinics will basically cut and tape to part of the patient anatomy and then start the treatment. There's 2 problems with that. Number one, it takes time, and time is money when you're in a clinic. And the second thing is from a fit and comfort and effectiveness standpoint, it doesn't always work perfectly when you are using arts and crafts. So we got a better alternative. We can take this patient data that already exists, because it's part of the patient's treatment plans, load that into our software environment and allow our bioengineers then to basically design an accessory called the bolus, right, that is patient-matched, 3D printing it and then getting it to the point of delivery. And so the beauty of this is you now have a device that fits perfectly, can be applied in minutes as opposed to the usual cutting and taping, and it's actually reusable for the next treatment, so you don't have to start all over again every time you do this. So very excited. This is a new opportunity for us. We just got the 510(k) clearance for this at the end of the first quarter, and we're starting to commercialize this now. So staying with the theme of personalization. Dental, by very nature, is personalized medicine. And that's a good thing because otherwise, we'd be walking around with stock parts in our mouth, and I don't think any of us would want that. So the story for 3D printing in dental is really one where we are looking to advancements in the technology to basically migrate away from legacy milling and casting procedures into 3D printing workflows. As the technology in 3D printing has advanced, both from a hardware side, a software side and a materials standpoint, we're able now to take more and more dental indications and 3D print them more cost effectively, faster, less messy. I have a picture on the left there, that's an actual kind of lab with kind of a historical way of grinding and shipping and casting pieces. And just have a much more elegant and efficient workflow that also allows us, again, similar to other areas, make more complex, more intricate designs to address more patient needs. So we've got a lot of experience in the dental space as many of you know. And the way that we go to market and we approach this segment is fourfold. Everything starts for us by looking at the end-to-end workflow. Where does it start? And what is the end product that you need to have? We're not just looking at the piece in the middle that involves the 3D printers, but making sure that we understand the full piece, so that we can engage and work with our customers on the full length of it. From there, we leverage our hardware -- printer hardware technology. We've got the broadest in the industry when you think about the different metals offerings that we have as well as the plastics, resin side. We combine that then with a series of materials to be developed in-house with the right properties to address the indications that we need and have the regulatory clearance to be able to sell in the major markets. And then the fourth piece, this is really a strong point of differentiation for us, is we build really intimate relationships with our customers through service and hands-on training. So the picture that you see there on the lower left, that's actually one of our facilities in the Netherlands, where we've taken a large room and basically equipped it the same way as a dental lab would be equipped, right, with the long benches, the lighting, all the different tools and equipment. And we run services in there -- service training, sorry. So we bring lab techs into that facilities, walk them through the entire workflow hands-on and make it so native to their normal operating environment that they leave there and say, "Yes, we've done it. We've got it. We can go now do this within our own workspace." Extremely powerful. So the way that we commercialize this is by basically focusing on each of the major subsegments of the dental market and then looking at the different players that we have within the ecosystem and building solutions for each of them. So if you think about orthodontics, right, our history in the aligner space is well-known. We've got solutions there using our large platforms that are extremely well suited for high-volume OEMs and large dental labs. We've also got solutions for smaller players, right, your mid-to-small dental labs as well as DSOs or dental clinics, mostly around our NextDent platform, hardware together with a series of materials that enables the production of splints, aligners, placement of traditional braces and so on. And so we've got a bunch of parts set up outside. Hopefully, you've got a chance either during a break or afterwards to take a look. Both Industrial and Healthcare parts are outside, will help bring these things to life a little more. Prosthodonics, so this is basically restorations to teeth, it's a simple way to think about it. We've got metal offerings here that allow labs to print crowns or partial dentures, removable partial dentures built in a metal framework. And we've got MJP printer that is being used for making high-precision planting models. And then again, our NextDent platform where we now have materials that allow us to make permanent crown restorations as well as dentures and a number of other supporting tools. And then finally, implantology, name is kind of what you think, right, implanting teeth. Metal printers, the star of the show here, allowing labs to print the structural components that go into the mouth in order to accept the implanted teeth. And then on the NextDent side, we have printers and materials to make planting models and surgical guides for where the drilling and cutting needs to occur. The other thing that I want to highlight on here is you see that Oqton box kind of tied in throughout. This is the Oqton software. You'll hear more about that from Ben, an extremely efficient workflow for the dental space, already getting a lot of traction in there. And it's being very well received in the marketplace for managing dental operations. So if we stay with personalization, really up to this point, we've talked predominantly around personalizing at the manufacturing point. And what we're seeing now is that, that line between manufacturer and point-of-care provider is beginning to blur. You saw it on the dental side. You've heard about it in the radiation oncology side, where we said, "Hey, we can do things," and the clinic is starting to manufacture and make things on their own. And you start to see that across the general health care system as well, your kind of more broad-based hospitals and clinics. Personalizing here, at that point of care, gives you very similar benefits, right? You get better patient outcomes, you save time, you save money. Gives you an opportunity to address patient needs that otherwise aren't getting addressed. And then this new one, new within the last 2 years, there's been increasing pressure for really any kinds of organizations to get greater control over their supply chain. That includes hospitals. So they're becoming increasingly interested in taking more manufacturing in-house on site. So you're starting to see more research, more publications, more conversations happening on this topic. The FDA is getting involved and basically starting to solicit, come in and trying to investigate how should we regulate manufacturing at the point of care, because historically, it hasn't been their [ white bread ]. And you're even starting to see large hospital systems starting to deploy this within their organizations. So for example, the Veterans Affairs, right, largest hospital systems within the U.S., they signed a contract with us. And they are actively in the process of deploying different 3D printing technologies at the point-of-care for the very reasons that we've talked about. And so the type of solutions that we make available to the point-of-care systems, it's really the same ones that I've been talking about here. It's implants, personalized instruments, anatomical models, surgical planning services, the software to do all these things and then the printers and materials for making it happen. And we've got a flexible deployment model to bring that to market. It starts with, on one hand, having a complete turnkey on-site managed service model where we basically agree with the hospital that they give us a room within the facilities. We'll bring the equipment. We'll bring the materials. We'll staff it. We'll run it and essentially open up an order window where we deliver whatever it is they are asking for. The other end of the spectrum, the training and deployment is where we basically sell the technology to the hospital, the consumables and materials that are needed, train them on the utilization of it, stand them up so that basically can run it themselves and we step back. The middle ground there is the collaborative solution is where we basically take different parts of the work and divide it up between us. So for example, hospital would come to us and say, "Look, we've got this patient data. We want you, 3D Systems, to go ahead and do all the surgical planning for these cases, send the digital files back to us. And then we will print them on site with printers that we purchased from you and then make those parts available by basically printing them on demand ourselves at the hospital." So lots of different ways that this is coming together. Beyond our traditional, let's say, legacy portfolio of plastics and metals, we're excited now also to really be on the cusp of a very interesting first-to-market opportunity in point of care with 3D printed PEEK. So PEEK is a material that's already well-known within the medical sector, predominantly as a milled material used for cranial restorations. It works. People are comfortable with it. But being able to 3D print it, we now are able to say, "Hey, you can do the same thing, but it's cheaper to make, faster to make, last, less messy. And you can start designing geometries on here that you can't do with traditional milled methodology." So exciting prospects. The thing that's particularly neat about this particular technical platform is it's a very user-friendly, very environmentally friendly printer device that is actually suitable for placement inside the hospital, relatively close to the operating theater. So you can make a very on-demand, real-time solution with that. So that kind of covers off where I want to stop with respect to talking about our existing technology, right, and then kind of make this transition over what we're now doing on the pharmaceutical side in the future. So if you think about the way drugs are being developed today, right, it starts with petri dish work. If you're successful with that, move on to small animal studies, then larger animal studies, and then ultimately, clinical trials into the human body, hopefully followed by FDA approval to bring the drug to market. It's an extremely lengthy process. Could take 12 years if you could follow this process end to end like this. Expensive, more than $2.5 billion by the time you get the drug approved. And an extremely low success rate, right? Only 1 out of 10 actually makes it through all the way to the end. So with bioprinting technology, we think we've got an attractive alternative coming here. Basically, what we can do is by using a bioprinting technology, we can create small models and devices using human tissue that you can utilize during those early test phases that allow you to test more complex scenarios earlier, getting fast results, fail fast, learn fast. It's highly scalable. You can replicate these devices. So it gives you an opportunity to do really high-throughput screening, right, lots of different candidate formulations that you can test simultaneously versus having to do things sequentially, so speed up there. And then the final benefit is with this, and these predictable results that you're getting, you can actually see a path now towards reducing the reliance on animal testing. So we're bringing this to market kind of twofold. So first, we've got a research platform. So this is the acquisition of the Allevi business that we made last year, where we have a small printer device that we sell into the market with bioinks. We've got about 500 or so of these deployed out into the market with different kind of labs. And so we're getting very good feedback on how people are using these devices, what kind of research that they're doing and so on. And so that knowledge, we can now translate into the conversations that we want to have with the pharmaceutical companies and say, "Here is the kind of research that you can do with this. It's been proven. It's being used on there. You can trust it." And that's where we want to get involved with those companies, not just with selling them these devices and products, but also offering these services, these research services to them on an outsourced basis. And then as we evolve with that, in time, get to a place, where we really now start to develop in-depth, long-term partnerships with these pharmaceutical companies for those development cycles of specific drugs. So that's the path that we're on with the bioprinting side here. And again, you'll hear the other chapter of it this evening about what we're doing with respect to regenerative medicine applications that go inside the body. So here's what I want to leave with you. When we talked about those trends for the industry overall, health care is a growing business, there's no questions. And the trends that are driving this, particularly for us, is the effectiveness and the benefits of using 3D printing to manufacture these devices. Personalization, right, starting by collaboration with the manufacturers and then bringing that to the point-of-care and then accelerating these long and expensive pharmaceutical development cycles. So in that context, if you're going to look at us as a company, we've got more history, depth of application knowledge and breadth of offerings than anybody else out there in the industry. And so you put those 2 together, and you'll see why we're excited about the growth prospects for this business. Thank you. With this, I want to turn it over to Reji, who will present the Industrial Solutions Group.

Thanks, Menno, and again, thanks again for everybody coming in this afternoon and look forward to spending some time with you today now and then later on in the evening as well. As we go through and talk about this section around Industrial, it's really an opportunity to just continue to amplify the areas that Jeff had spoke about earlier with respect to where we focus and how we build. And as we -- each day, we hear about more and more challenges facing the marketplace, whether it's supply chain elements like that, but there's also a whole series of trends that are evolving as companies accelerate what they're doing. So if you think about connected factory, the need for productivity, the deglobalization that's happened and cost management, speed to market and sustainability, each of those provide tailwinds as we think about additive and specifically in a lot of the areas that 3D Systems is working in. And so we'll talk about that today as we go through. Now one of the things that I kind of joke about with respect to Menno and myself is Menno's entire industry within health care is the body, right, the human body. Everything that he spoke about is replacing parts, adding to the human body. So then if you think about everything else that exists in the universe, it's what I'll cover, right? And so that can be overwhelming as one would think. But -- so what we try to do is focus in a few high-value segments. And so examples of those are here. It's around aerospace, transportation, semiconductor, consumer tech, energy, jewelry, academics and service bureaus of manufacturing which even then become large-scale opportunities. So what we've done is, in addition to the organization that Jeff talked about, Industrial and Healthcare, within the Industrial team, we've also built segment teams. So within each of these areas, we have dedicated teams of people in terms of understanding those customers, developing applications and then going through a process of helping them solve problems and offering them a series of portfolio of offerings. And what you see here is estimates, because that's all they can be, of serviceable market. And the takeaway here is, there are significant growth opportunities in each of these areas we play in and a lot of opportunity for just ongoing growth as we dig in and expand what they're even doing now. So if we look at the way we think about markets, it's really in 2 dimensions. One is, and Jeff shared earlier, if you think about the advantages of additive: speed to market, design freedom, intelligent manufacturing. You guys have heard all those. You know all those. And then you think about the needs of a specific industry that can vary. I mean the needs of a jewelry industry vary dramatically from that of a space company, but they share a lot of the ultimate benefits of additive. So what we're able to do is, when possible, we share information back and forth across the segments. But importantly, we have a deep understanding of these segments and then can develop solutions based on that. And I'll give you some examples in a little bit as we kind of walk through that. As we look at growth, there are a bunch of different ways you can think about how an industry can grow. And we've kind of -- one of the elements is to look out in a couple of vectors here. One is production volume, how big of a market is it in terms of how much are they going to produce, what are they going to do. The other thing is if you think about the part cost, the part value, for example. So if you look in the top right, connectors, an individual connector may be pennies or dollars, right? The individual connector itself is not very valuable. But if you look at the volume at a connector company, for example, in the long tail that they have and the tooling costs associated with that to take just a small percentage of that tail and move it into something like this represents a huge opportunity for growth with respect to dependence on software, on material productivity, machine precision. But that's an area where you have huge volumes, maybe a low part value, but huge volumes associated with that. If you contrast that with the bottom left, so there you have, let's think about semiconductor, and we're going to go into more detail in a minute, where you may be making hundreds of parts, not millions of parts, but the value of those parts are huge -- is significant. So it gives us a lot of growth opportunity there. And then if you look at in the upper left, things like space or jewelry, and again, we'll talk more about jewelry, where the outcome in part is hugely valuable and there's a lot of volume associated with it. So each of those areas provides us opportunities to grow and expand. So one of the examples, you can hear talk about applications, but it's hard to really kind of begin to think about what that means, and we use the word over and over again. So I want to go through a few examples. The one I want to dig into a little bit is around semiconductor. So if you think about semiconductor fabrication equipment, that equipment can cost more than $100 million for that machine. And we all are experiencing, in some form of fashion, some -- we see the delays of semiconductors right now and the need to expand production as EVs grow and other things grow. So a lot of companies are expanding. But in addition to that, if you're going to -- if you're a consumer or a buyer of that machine, if you're spending $100 million on a machine, you want that to have productivity, you want to have precision. And a lot of the things that you need can be answered with additive, and we're partnering in that process. And so you go -- we're working with Wilting team who has an OEM customer. They're a Tier 1. We work with both of them. And we are working on improving the overall performance. And with that, we have the application team. We have -- in this case, we're working with the 350, the metal machine. We're working with our 3DXpert and the other software on that. And you see a series on the right-hand side of that slide, the types of applications we end up with, whether it's a manifold fluid flow, the shower head, the wafer table, because you think about it, you're talking about the diameter -- I mean, atoms that you're trying to manage on that. So you want precision. You don't want things to move. You need it to be cool. These are things that additive can do. And you'll see, when you have a chance on the back table out there, these parts. And so we've worked with them so I want to show you a video, and then I'm going to come back to this a little bit, but the result is improved productivity, improved performance, part reliability, design flexibility, all the things. And again, if you're buying a $100 million machine, these are the kind of things that make that machine better and make it more productive. [Presentation]

So as you listened to the story there with the Wilting team and our team, really what it does is articulate exactly what Menno shared as well as what Jeff shared. So what we began with is working with the OEM and with Wilting is to really understand what parts of that machine are suitable for additive, so really ground-up, and then developing the application and the optimization, topology, whatever it might be around that to work with that. So in the case of the manifold, which is a picture there, and you see it in the back desk, is really to say, okay, we need to solve that problem and here's how we're going to do with additive. Then we go through the process of developing that, and then our team, in this case, it was in Leuven, actually begins to produce that on our machines, validates it in a production scenario. And then we began to do some bridge production there, right? Because we -- they're not ready -- the Tier 1 is not ready to invest yet. They need some parts to make sure it's really going to work. They see it's going to work. Then we -- our goal is to transfer. We don't want to become a service bureau for them. We're trying to move it over to them. They begin to take that, produce those parts, implement it. And then like you saw in the very early video, they're actually going to buy another machine, he said. And so -- but the benefit of that is we can also become -- an opportunities where something goes down or they are in a process where they need to scale up, we're there as well as safety production. So it really is that left-to-right approach around how we're going from ideation to validation, to really scale it up from this whole process. Another example is motorsports. You hear us talk a lot about F1. I mean we work with almost every one of the F1 teams, especially in the wind tunnels and a lot of the work on the PIV there. But this is an example -- and again, it was a very early story that was played with Rodin Cars in New Zealand, which are focused on single-track hypercars. And so in this situation, they have a number of our products, we do a lot of things, but they were really trying to redesign a gearbox to be able to create both the hardening as well as the light-weighting and just the overall performance. So, in this case, our application teams in Littleton worked with them, designed the product and worked through a whole series of development efforts with their teams and now -- and with the DMP 500, as well as some of the software work. And we've got that there with them as well as working with them and castings and some of the other polymer based. But again, working through how do we take knowledge of what we have in motor sports and the specifics of this customer to then design something that works for them. So, again, one of the big pieces here is what we are not doing is just selling printers. We're really having a complex offering to sell a solution that answers that makes their life easier from that perspective. Jewelry is something you may have heard about from us speak about before. But if you really think about jewelry in a lot of ways, it is the most -- some of the most precise castings, right? I mean the level of work that has to be done around the high precision, something like Jeff called it like precision microcasting. That's really what it is. Historically, within jewelry, it was done through tooling, creating a tool, which is expensive or hand carving. And so what we've done, though, is kind of created a whole digital workflow from the idea of building the software, to build the process, to the machine and the wax and the support, and you can see it again in the back, you'll see a red -- a little box with red wax. And that process has enabled -- there was a company called IMO, who we were working with who does a lot with their supplier to a lot of large jewelry companies. And what we were able to do with them is to improve their productivity significantly, both the lead time, the number of patterns they can do in hours, the ability for them to create new things, that would be very difficult to do with hand-carving or tooling -- or expensive tooling. And then also with the casting and the burn-off so you don't have a lot of residue. You don't have a lot of those elements there when they produce it. And then just an overall reduced cost, because if you can imagine the cost and hand-carving some of these pieces versus what we're able to do. And so this actually is a growing part of our marketplace in an area that truly benefits from understanding what happens. And the benefit of this, we actually just showed how we go back and forth. A lot of the workflow that we identified here was workflow we had identified in dental. So, by taking knowledge about what we had in dental, we were able to put it into this and benefit from that and grow that part of it. The last example here is around space. So, as you think about private space, you think about the growth in space and what's happening, there's a lot of opportunity, and we do a lot of work in that. Well, one of the areas around propulsion is -- and the purpose of this story here is to talk both about -- you think about the breadth of our offerings, because Jeff talks about that. The benefit of that is we can have a level of almost agnostic, as we think about the best solution. We're not forcing everybody into a metal solution. We're not forcing everybody into a polymer solution. We're able to think about what is best. So, in this example, with propulsion, in some cases, what we realize is our QuickCast, a diamond QuickCast, which is an amazing product. You can actually see it out there, you'll see the drill bit that's used for out there behind the table about the opportunity to create complex designs and something that can be burned off and turned into metal and we do some of that here with this. Other situations, we have the opportunity to use metal and direct print with DMP with the 350 or the 500 and some of the thrust chambers and injectors. But the flexibility there as well as a lot of our application engineers coming out of space teams helps us to understand that, and we were able to kind of create a solution in this case. And continuing to expand our opportunities within space around this area. What we see is, over the past period of time since we did the reorganization is that the approach like this is translating itself into financial performance as well. The difference in '20 to '21, you have a lot of growth that was happening with respect to that. But then we also seeing, even now as you move into '22, we're seeing the double-digit growth continue. And we expect as we go through and Wayne will talk about it as we continue to grow the opportunities here. As you look at really what we're trying to say and kind of really reiterate here, is within the sector, within the industrial market, it is a large and expanding set of opportunities. They are -- it is everything outside the human body, but we're also focused on some core areas. And within those core areas, we have significant platforms for growth. And it's a customer that want Additive and we have solutions that they need. The other thing is, again, we are doing far more than just pushing a box, pushing a printer. We are creating a solution and a set of application expertise that allows those customers to rely on us in order to be able to grow their business, and we're able to benefit from that growth as well. And the third part is around the full solution, applications, material, software, systems allows us to do those first 2 buckets. And that portfolio of offerings is critical for our ability to sustain the things that Menno and I were talking about with respect to applications. So, we're going to pivot now on the presentations a little bit now from the application orientation of Industrial and Healthcare and begin to allow you to have a chance to hear more from the specific verticals, I mean, the offering. So, Ben Schrauwen is going to come up and talk a little bit about the software with Oqton and how we're working on that. And then after that, we'll take a break and then David will be sharing around the other parts of our portfolio. So, with that, Ben.

Maybe -- I'm relatively new to the team. So, I joined 3D Systems back in November with the acquisition of Oqton. Maybe just started briefly giving some background about myself. So, I used to be a professor in machine learning and robotics about 15 years ago. I was at Autodesk, a large software company in the manufacturing space was heading their advanced manufacturing, the vision. And from there, I then cofounded Oqton that was recently acquired. So, the reason I started Oqton is because we really saw this amazing trend in the manufacturing industry, where every company we talked to being like a large automotive OEM or a consumer goods company or even like small SMEs, being suppliers for larger companies, everyone was being disrupted. There's like batch sizes were getting smaller, lead times were getting shorter. The classical approach, which was developed over the last decades where this very waterfall model, that led to getting the costs down actually now is becoming really a hindrance and it's making it very difficult for companies to innovate quickly enough. Also, several very innovative processes were coming of age, like leveraging like industrial robots, 5-axis milling stations, complex 3D printing processes where there's a giant skill gap, like a lot of these machines need extremely well-trained engineers to program them and they are less and less available in the markets. And then, of course, like this incredible push, especially the last couple of years around sustainability and deglobalization, where a lot of that manufacturing expertise really needs to be brought back and the current software approach and the current tools really weren't able to solve these problems. And that's why we started Oqton. And to give you a bit of a sense of what it's all about, I'll use this one Additive example. So, it's a customer use case. So, it's -- so the part you see here is inserted into like a large control valve. So, like, a big control valve like this, like the part is inside of that control valve and it really controls the pressure flow properties of these control valves. A great use case by a customer of ours, Emerson. If you look at the cost, the typical end cost of one of these additively produced parts, you can split it up in presales and engineering efforts. You need to design this part. You really need to take into account the limitations of the additive process and designed for the process. Then there's a big machine write-off component. If you actually look to, like on average, the utilization of 3D printer equipment, on average in the industry is about 30%. So, there is a lot of, like, underutilization still. And so that's where there's a big write-off components in the cost of a part. Then there's material and operators, which actually are quite small. And then very often, there is also a sizable post-processing costs where support needs to be removed. You might have to do some post-machining actions. But if we really think about it, a lot of those big costs can be significantly reduced through better use of software. And it's discovery of the additive use cases, how can we discover which application additive can be a real benefit. How can we make it easier to then design for the additive process, how can we increase the productivity of the equipment and the overall operation? 3D printing is also always part of a larger complete production workflow, like it's -- we're not just building prototype parts. This is a real production part. It needs to be -- heat treated, post-machines might need to be assembled. So, it's -- Additive is part of a whole production process. And then, of course, quality is also really key. Back in the prototyping days, the part needed to look good. Now the part also needs to be needs to have fit and function. So, quality is becoming more and more important in the additive space. There's all kinds of tools out there in the market. companies trying to do this now. We need to buy 10 different licenses of all different types of software and Jimmy rig it together themselves and use cell sheets to manage everything. What we try to do with Oqton is to get all of this into a singular platform. And we really -- yes, so we've seen cases and we really believe that software can -- like a proper interconnected software platform approach across these 3 different areas can really reduce part cost by 10x, which actually means that many more applications can be done with Additive. Because getting the part cost down, suddenly, there is much more business cases that become viable for the additive process. And so software can be an incredible enabler for accelerating the adoption of Additive. And that's what -- that's why 3D Systems has invested heavily in building out the software team. I'll just go in a bit more detail in each of these areas. I'll go quite quickly this -- some of these things are a bit more technical. But for example, we need to be -- we need to give tools that make it -- all of companies have giant catalogs of parts, tens of thousands of parts in their PLM system. You need to be able to discover, okay, which one of these parts can really benefit from Additive. And it's not just the geometry, but it's the overall like supply chain complexity, it's inventory management, like demand forecasts, which really can drive this business case analysis. Then there is using software to better control the process, like for example, like the no-support technology that was already developed, is like how can you, using software, drive these machines better so you need less support. You can increase the accuracy, you can reduce the failures, again, making additive more applicable to more different use cases. DfAM is getting more and more important. A lot of the tools that people use to design parts, CADs. CAD was really designed in the '70s to work very well for machined parts, but in Additive, we have much more design flexibility, and we really need a whole new set of design tools that can design lattices and implicit surface, and these generative designs that, really, with the least amount of material can still support all the loads needed. And lastly, simulation, like having to do multiple print iterations to then really find out if the part will actually work is quite expensive, like both in time as well as the cost of all these prints. But using simulation technology, we can actually predict where these parts will fail, where will they crack, how do we need to support them. Again, like improving this discovery phase for which are the applications that we couldn't do with Additive. The second big chunk is productivity, okay, once we've identified the parts, the use case has been acknowledged. The design is done. Now we need to produce them at scale. It's very important that we can have a production management environment that's fully tied to all of the different business systems. Because in the Additive case, very often you use mass-customized parts. So, every order and different design needs to be generated, and we need to have full traceability from the CRM and the ERP system, all the way down to production. That's something that can be provided through Oqton. Then because of this mass customization, every part can be different, which means there can be very repetitive engineering tasks like quoting and build preparation and nesting and all of that and like especially from my history in machine learning, we're taking a lot of the state-of-the-art in deep learning and AI, and applying that now in the production environment. Like where are the opportunities to really reduce the repetitive engineering tasks and assist engineers. So, engineers can only focus on the difficult cases and don't have to do all of the same repetitive work every day. Then there's, of course, the end-to-end. Like I mentioned, Additive is always part of a much more complex production chain. If you're -- if you need post -- complex postprocessing and machining, this can all be captured in the software, and then there is traceability. Very often, these parts are required in regulated environments. And so we need full traceability of the powders, the training levels of the people, the maintenance schedules of the machines, everything needs to be traceable to guarantee these regulatory requirements. Good. And then lastly, there is quality. How can we now make sure that once the parts are produced, they're actually up to the specifications that are required? And here, there's a number of different things that we're working on. So, there is monitoring the additive process itself, using melt-pool techniques, thermal or visual techniques that we can then analyze in context of how the part is prepared. There is material property-specific capabilities, like, for example, porosities and things like that. There's geometrical quality control, which we can leverage the Geomagic portfolio. And then there is actually analyzing all the sensors that are in the machines themselves, like monitoring oxygen concentrations and things like that continuously during the production process and then being able to perform predictive maintenance and aspects like this. So, this is -- so like all these aspects are all the different things we're working on towards the puzzle to then get to being able to significantly drive down the cost of parts using software. All of this is coming together into the Oqton Manufacturing OS, which is an end-to-end production platform, cloud-based, works very well with Additive, but it also supports many other production technologies like industrial robots and CNC machines to really allow us to automate the complete end-to-end process. This was started by my company, Oqton, acquired within 3D Systems and now is integrated within the 3D Systems software portfolio, and I'll give a bit more detail. But first, a quick video of how 3D Systems uses Oqton within their Littleton facility. [Presentation]

So, this is one of many customers where Oqton is deployed. This was 3D Systems, very easy to get some very nice imagery. But so similar like how the rest of the 3D Systems business is structured, we also focus extensively on business verticals. So, we have a team really focused on dental and medical application and a team focused on industrial applications. In the dental use cases, we see Oqton very often adopted, because of its unique capabilities to drastically automate the preparation of 3D printing and CNC programming, all within 1 software for crown and bridge production, dentures, clear aligners. All the way from very small companies with just a couple of machines, all the way to some of the largest dental producers in the world are using Oqton. Then on the medical device production space, so very similar to the Littleton facility you saw earlier. So, this is implant, surgical guides, instruments where traceability is very, very important and especially like the FDA Part 11 Compliance, traceability is one of these things we focused on extensively. Then there is the Service Bureau businesses or often what's also called this internal service bureau. So, there is large industrial manufacturing companies that have this internal service bureau setup where Oqton is very often used across multiple facilities geographically. All managed from 1 software where you can then do full order tracking, MES, integrated build preparation. And we work on every different type of equipment from all the different vendors not only the printers, but also the heat treatment, CNC machines, all of that can be connected to the same platform. And then we're also quite active in Aerospace and Defense, where we again offer full traceability, like we can be fully ITAR compliant, and we see a lot of demand in that area as well. It's very important with this platform that we really form an open ecosystem, like our customers have equipment from all the different vendors, and it's very important for them that they have 1 platform that is -- that doesn't force them into 1 type of equipment, but they can just keep expanding and keep adding equipment. So, Oqton always was very open and neutral. We already have agreements like integrations and very often also reseller agreements with a lot of the partners shown on the slide here, which is really to the benefit of the customers. Like this -- like playing in this very open ecosystem, Oqton is also built on very open APIs. Others can also build on top of our software if they want. Then like the way -- well, maybe a few words on how the acquisition was structured. So, Oqton was an independent company acquired by 3D Systems in November. But then we really decided to keep the Oqton brand to represent 3D Systems' software strategy. And the existing teams within 3D Systems actually joined the Oqton software organization. It's a separate business unit that will be 100% focused on software and is like all of the business functions are in that -- in the business units. So, marketing, sales, research and development. And we're actually setting up a -- like a data firewall between the Oqton organization and the rest of 3D Systems that will be externally audited to guarantee that neutrality, where we can work with all the other machine OEMs without any risk of potential IP from these machine OEMs leaking into the main 3D Systems. So, like that neutrality, we take it very, very serious and we're going to significant lengths to really ensure that we can stay both a neutral brand as well as guarantee that IP protection. Then after the acquisition, now the team very significantly has grown, and we're really able to accelerate. There is also a big commitment from 3D Systems to keep accelerating and keep investing in software, like we mentioned back in November that we have a target to reach about $100 million in recurring revenue by the end of 2025. So, it will be a very significant contributor to high-margin and high-growth revenue for 3D Systems. And so all of the existing assets to the 3DXpert, 3D Sprint, Geomagic, are all part of Oqton portfolio now and will all be integrated in a unifying strategy. And so the unified software strategy, I'll just go very quick. This -- so there is Oqton Manufacturing OS, which is what I described before. It can do everything from managing, designing, managing the printing process all the way down to inspection. Then there's a lot of these desktop products that existed before. So, the Geomagic portfolio, 3DXpert, Amphyon, which was another acquisition that happened about a year ago, and then controlling software. We're going to make all of these different desktop products. We're going to make them cloud connected. So, there's a lot of benefits, both from a workflow perspective, collaboration perspective as well as the ability to take some of the Oqton AI algorithms and assist workflows within these desktop tools. We're going to take some of the core IP that's in these desktop products, make it available as services within the cloud and then making it so that these services can connect very well to scanners, printers, other manufacturing equipment. So, this is kind of like how both the Oqton cloud strategy as well as the legacy desktop products really come together into a unified software platform that will be also open for third parties to easily connect into. Good. So, that was it for me. We now have a short break. I think it's about 15 minutes. And after that, David Leigh will give an overview of the hardware developments. Thank you. [Break]

It's the best or the worst place to be. Right after the break, because sometimes people like, man, doesn't seem like there's as many people as there was, but it looks like we got everybody back. So, I'll let people slow roll in. I'll give you a little bit of introduction about myself. I'm going to make this a little more interactive, if that's okay, guys. Is that okay? I can't really see you, because they've got these bright spotlights. But based on my hair line, you probably can't see me either, because those bright lights are probably shining back at you. So, -- so my name is David Leigh. I joined 3D Systems about a year ago as their Chief Technology for Additive. I've been in the industry since its inception, for the most part. I worked in the laser sintering world, which was a technology that was acquired by 3D Systems in 2001. So, I started in 1990. And so I started out in materials development and then we started figuring out that there was problems with lasers. So, then I got into that. Then we've had to figure out how do you calibrate it. And then once you calibrate it in a lab, how do you take that somewhere else? What if somebody's put it in a garage and they don't have air conditioning and how are you going to maintain and collect that. So, then I transferred into field service. And then from that, I opened a Service Bureau. And so I ran a Service Bureau for about 20 years. And so I'm a practitioner of the technology. I was a customer of 3D Systems before I've joined them. So I've got a unique perspective on the industry as well as my role. In field service, I found that there was 2 roles of field service. One role was to placate the customer, because expectations were too high. And so we need to send field service out to make them feel better. Now they may not be able to fix it, but at least there's a guy there that looks like he's trained and I think the patient is getting better. So, we have hoped that he will survive, the patient, being the machine. The other thing is we found that we were also sat sometimes on the side of engineering. They didn't quite finish the product, but the ship date said it was supposed to ship today, so they shipped it. And so we would go out and we would be an extension of manufacturing and engineering, and trying to fix all that. So, that perspective has really tempered my opinion on what my role as Chief Technology Officer is. So, what I'm going to do is I'm going to tell a story. I've got 2 props, okay? So, we've got 2 props, I'm going to use 2 props. And I'm going to tell the story. And every good story has a good protagonist and a good antagonist. So, one of the best, I don't know, best movies ever when it had a really good, well-defined antagonist was probably The Empire Strikes Back. Anybody ever watch that? Anybody watch it like live, like when you had to wait at The Empire Strikes Back and poor Han Solo was frozen in Carbonite, you had to wait like 3 years. I mean it's not on Netflix, it's not like -- there's no leaks. I mean you had to wait, and you didn't know. And that's a -- you've got to resolve that tension. And what you -- what I found out, as I've gotten older, is for all of you, English majors, which I was -- the reason I did engineering is, so I could do math and didn't have to read books. But one of the things about any good balance of good and evil, protagonist, antagonist is the fight. It's -- what is it, man against man, man against himself, man against nature. And I don't think it's very popular. I think man against God or Divinity or whatever was kind of maybe a fourth one, but I think we boiled it down three. So, you need to have all 3 of those elements. And one of the things that, that teased out is while you may say Darth Vader is the worst enemy in the world, and we want to have all the rebels go attack that; Luke Skywalker had to deal with man against himself. Unless -- in order to beat the enemy outside, you have to beat the enemy inside. So, my job is to beat the enemy inside. And I'm going to walk you through that. I'm going to talk about our technology, and I'm going to talk about what we're doing to make sure we defeat the enemy inside. But before I do that, obviously, none of that was on a slide. If you have the little bottle opener, any Church of Christ, Baptists -- I guess it could be used for grape bottles. But anyway, beer bottles mostly. So, if you look at that, that's titanium. -- built on our machine using our software, and this is what we call topology optimization. So, if you're familiar, and you've been in the industry for a long time, it makes sense. If you've not been in the industry a long time, this is what topology optimization does. It's one of the things that our 3DXpert software can allow you to do. Actually decrease the weight, maintain the same strength and rigidity that you would have for a solid part, but basically remove everything that isn't needed for the function. And that's one of the -- this is just a really good tool to illustrate what can be done with Additive that you can't really do well, other places. And so this is a lot of the reason why our customers are going to Additive is, because it's lightweighting, which is more sustainable. It uses less material, which is more sustainable and sustainability is a big deal. So, anyway, so that's that part. And so anyway, it was built. I can't remember the orientation, I think generally, it was built standing up. So, they were attached to the plate. And so we obviously have to disconnect it. So, we cut it off of the plate. But other than that, we did not use supports. That's also an enemy to additive is anything that we have to build that the customer doesn't need, right, is support material that's built. It's material that's used that doesn't need to be used, but we had to use it for manufacturing. It's time wasting, it's material wasting. It adds complexity when you don't want complexity. So, one of the holy grails of metal manufacturing is supportless printing. And I think you've heard that a couple of times today. We're not the only ones that know how to do it. I think some others probably propagandize that more than we do, but it's something that all metals manufacturers, including us, do and a big part of that is software. The good thing for us is we have probably the broadest suite of software that allows us to do that and Amphyon, which is one of the companies that was acquired. Ironically, I was at EOS, when AM Ventures's Dr. Langer, so he's the owner of EOS, his AM ventures actually invested in a start-up with Amphyon. So, it was one of the AM Ventures German companies. And I was there as an EOS employee, when they were saying, hey, 3D Systems, looks like 3D Systems is going to buy that, what do you think? And we've talked about that. And so we -- again, good protagonist, antagonists. It's amazing how things change. So, anyway, so I'm going to dive through this. I'm going to pause a couple of times. Please, if you want to ask a question, deep dive on a thing, just let me know and I will stop and we will back up, but I'm going to walk through it. So, the first thing is to know about the protagonist for me, the protagonist for us is 3D Systems. We're the hero. Obviously, we think we're the hero, because that's -- we've got the name badge. But this is our history. And with every good hero, we also have a dark side to us. And so one of the good things about 3D Systems is we are probably the richest as far as technology. We are the richest as far as the length and the depth of what we've done. We've developed a lot of tools that are being used today in the industry or they've taken derivatives of what we've done. The problem is, is we're one of the oldest in the industry and with an older person, old habits die hard or can't teach an old dog new tricks. So, there's obviously a lot of younger start-ups, will point to companies like 3D Systems and say they really can't keep up. So, what we have to do is push against that. So, you can see here what we've done. And so there's a lot of stuff that we've done, we've acquired. And probably the best applications story you've seen today is probably some of the health care in the acquisition of Medical Modeling, which was in Littleton. As a Service Bureau, I address primarily polymer. I was innovating in around polymer materials being used in aerospace. Andy Christensen at Medical Modeling was primarily metals used in medical. And then we had several others that were out there. And so Greg Morris, was one that GE acquired and used to leverage his technology for GE Aviation, and they also bought Concept Laser. So, a lot of us that were the kind of the principal practitioners, were all acquired by different companies. And I think 3D Systems has done a good job of embedding the workflow, as well as the technology focused on craniomaxillofacial. And so we think we can leverage that in other areas, and you saw that in Reji's presentation of how we are able to do that with other things. So, I think that's one of the things that makes us pretty good. But anyway, but this is our technology evolution. Hopefully, you've read that while going through this. I'm not going to read the slides. We're located, I think, 30 facilities, generally, many of those through acquisitions. And so -- but our core facilities -- our headquarters is in Rock Hill. And for me, when I joined, one of the things I found is a lot of different places were doing a lot of different things, and we had a lot of different silos. So, you had silos within facilities. And then you also had silos within technology, core technology teams. And so you didn't always have a lot of integration. And that kind of focus is really good, but you do need integration. And I'm going to talk about how do we fight against chaos and uncertainty, when we go through R&D. But these are -- Leuven is shown in Europe. That's really kind of our European headquarters. We have a Wilsonville facility, which was through acquisition of Xerox technology that is our jetting technology. I'm going to talk about those, again, a little bit later. But these are areas -- and what I've done is focused our core centers of excellence at those facilities. And so instead of trying to just put everything on one mothership and say, we're going to put everything and everybody is going to do all the same thing, all the same way. I'm trying to create durable teams that can stay with the technology long term and have an area of competence, a core competence. And so when you think about stereolithography and Figure 4, that's Chuck Hull's baby. So, in California makes a lot of sense. When we look at metals technology, it was through acquisition of a LayerWise company that is now our direct metal printing. They're located in Leuven. We also have a small office in [ Riom ]. So, it makes sense to let them focus on the metal. So, that's what we're doing is aligning our core teams to our core technologies, so that, that way, we can get the benefit of that. So, here's who we are. So, when you -- if you go to the trade show, and I don't know how many of you -- some of you guys have been in this industry a long time, some of you may be fairly new. So, we divide up the 3D printing world into several core technologies. One of them is what they call powder bed fusion. Powder bed fusion is a powder that you then use some energy source to melt layer upon layer. We see that in polymers. We also see that in metals. We have that represented in our top left as our direct metal printing. Some people call it DMLS, some people call it SLM, but it's basically a laser that melts a material. So, the parts that you have in your hands, those bottle openers, they could -- don't have to be for beer. But those bottle openers are titanium out of powder bed fusion. Also in the middle on the right is laser sintering. It also is powder bed fusion, but using a polymer instead of a metal. The advantage of that system is that it doesn't require support. The powder actually supports it. We process it at a temperature close to kind of between the recrystallization and a melting point. The good thing about processing polymer materials is they don't shrink. Our metals materials, what happens is, we process it at a melting point, but then it's almost an ambient. And so it basically it melts it and it recrystallizes or it solidifies like immediately. And so it builds up a lot of stresses, so you have to put supports on it. But that's powder bed fusion. The next one is what we would call Vat photo or Vat polymerization or Vat photopolymer. So, we call that SLA stereolithography. SLA actually stood for stereolithography apparatus. And the STL file was also invented as part of that. So, you can see a lot of people use that. But that's our laser photopolymer material with a UV laser that cures it. Our Figure 4 printer is really kind of an offshoot of that. It's still using, instead of a laser and a point source, it actually is irradiating an area. So, it's using a DLP projector, similar to the projectors that are projecting these images here. So, you just flash that image and it's super fast. You heard some people talking about that. We also have a MultiJet printer. So, this is a jetting technology. Stratasys is another one that they call their PolyJet. Ours is a multi-jet printer. Same general technology. There are several other companies that sell that as well. But one of the things that we're able to do there is do fairly fine detail, because we're using just basically a bitmap and a jetting printer similar to what you would have in your home. And our color jet printer actually, they call it CJP, because it can do color, but it's binder over powder. So, this is what X1 uses. It's what Desktop Metal uses. Originally with ZCorp. It came out of a technology developed at MIT. We have that as well. And so pretty much all of the technologies that are available from all the competitors that we have, we have all under 1 roof. The one hybrid technology is a mix between the binder over powder and the powder bed fusion. It's actually in the powder bed fusion realm, and that's what HP uses and now the Stratasys with their high-speed sintering. And so it was a technology developed by Neil Hopkinson, but basically, you get instead of a an ink that absorbs energy. And so when you flash it with a bulb, it's going to melt everything under the bulb that has that ink on it. And so what you flash actually melts and then everything else reflects the energy and it doesn't melt. And so it's a fairly fast way to produce that. But we have that technology in-house as well. And the one technology we really didn't have, we just acquired, and that's our extrusion printing family. So, we -- you've heard Kumovis. That was acquired as a team out of Germany. They're really focused not on developing a super cool printer, but a really cool application is using this extrusion technology using a PEEK material to then go in and build medical parts. So, getting those qualified, I think, is going to be really good for the industry. We will lead in that. Again, through this was inorganic. This is through that mechanism. But then my job is to take that and grow it organically. And so obviously, if we're able to be successful with that and open up a market, we won't be the only ones in the market for long. We will be competing. And so it's my job continue to combat the forces, right, the protagonist, antagonist. For me, everybody outside is the enemy. So the other one is Titan, which was acquired also about the same time, actually maybe the same week. Titan is out of Colorado Springs. And it's actually using additive and subtractive and so we us additive to build it and then they also have a machining head that allows them to go in and get some fine detail. And so what that allows us to do is go really, really quick. And then cut the corners, right? So, literally cut the corners to make sure that it's smooth. It actually makes really good parts in very large parts. So, there's not really an industrial player in this area that's actually functional. So, we really see it as good as for jigs and fixtures, but we think we can do more than that. And so this rounds out our portfolio. And as Jeff said, there's not a demand or a need for us to go and acquire another technology. We have all the technologies in-house. So, I'm going to -- so here are all the technology's in-house. One of the things that I've been talking about is we need to be launching products. Every product needs to have -- let me back up -- most people will have a portfolio road map. What's your road map, right? And when they say, what's your road map is what products are you going to launch when? And for me, what I've seen in the industry, I saw it at Stratasys, I saw it at EOS. I saw it here at 3D Systems, is we tend to play portfolio road map like 4-year-olds play soccer. Anybody ever watch a 4-year-old play soccer? Anybody coaching a 4-year-old play soccer? So, what happens is they all run around and they find the ball and they all start kicking the ball at the same time, but there's nobody else in the rest of the field. And so generally speaking, what happens in our technology sector is everybody goes on a new project, you take all your engineering resources and you think you're going to -- if I put all of my forces right there, right, then I'm going to be more successful. I'm going to be faster. In reality, you're slower. You get in each other's way. So, what we have to do is stagger our engineering and allow us to basically spread the field and to pass common resources at critical times in the development cycle. Sometimes the critical time is solving a really hard problem in a lab. And sometimes the critical time is it's 4 weeks before launch, and we're having an issue with one of our suppliers. And so what I have to do is specialize, right? So, you have specialists and you have -- then you have some just industry player, broad players. So, if you look at that, I'm not going to read through all of that. I mean I'll answer any questions you want. This is the general road map. I've got to be careful about going into too much detail. But what we see is our SLA, we believe that that's an anchor. And so I've got a slide here in a little bit. It's going to be one of the case studies. I'm going to talk about SLA here in just a minute. We've just relaunched our SLA -- we're SLS 380. It was the SLS ProX 500 at one point and then it's a 6100 and so this is an extension of that. And so it's just adding some more capabilities on thermal management. And then we're going to continue to look at performance refreshing on that. Our metal printing, our 500 is pretty costly because of ancillary equipment. So, we're looking at doing a 500 Flex. And so we're working right now to bring the cost down. Our Figure 4, we've really found that to be really good for materials. So, a lot of our materials development has started there, and we're also taking what we learn on a Figure 4 and then extending it to our SLA platform. But then we also see an opportunity, as already was mentioned in our bioprinting is, hey, can we take our Figure 4 technology, and help with bioprinting. So, we may have some bioprinting variants come out in the future as other people in labs look into -- at doing that. Also going larger, so we can have more industrial opportunities. Our MultiJet printer is a really good printer for us, but it's long in the tooth. We have abandoned that all the little 4-year-olds left that little soccer ball in the field and they went off to the nice, shiny soccer ball. And so that one has kind of been sitting around. So, we're deploying some of our resources to go do that. And then ultimately, we want to make it a more enhanced product. We think that that's a long-term product, and we're working on that. The CJP is, again, it's the Z Corp, it's the binder over powder. We have an opportunity to address the markets that X1 and Desktop Metal are addressing. Also, [ Box and Jet ] has a similar technology. And we've really not capitalized on it. We acquired the company and have just kind of sat on it. So, I'm going to be working with the teams to see if we can reboot that and really leverage our expertise in that area. Ironically, I was -- the Desktop Metal stuff. I was working on that kind of the oven cycle of making metals, was working that in the early '90s through the university as well as my service bureau, but we always had some technical problems with that. And so we abandoned it, and -- but it seems like Desktop Metal and others have picked it back up. And then extrusion technology, I've already addressed that. So, before I leave that, I want to pause for a second before I talk about who the real bad guy is, and I'm going to talk about the bad guy here in a second. Any questions about our portfolio? Okay. So, here's the enemy within. The problem with, again, our industry or engineers in general, is -- and I'm going to talk about more details in just a second -- is first is we independently develop a technology. So, if you look at the CJP platform or the SLS platform or the SLA platform, it looks regular. I mean it's what you would expect it to be. It's designed very well for its use. But if you start to compare them as if they were a family, you can't see any family resemblance, right? No one looks like anyone else. And so what happens is because we independently focus our engineering efforts on that one solution, which is good, we're focusing on a solution, the problem is we all focus on the individual solutions, 4-year-old playing soccer. Everybody runs to this one, everybody runs to that one, but we don't always bring that core knowledge to it. So, one of the things that we see is we're not really using common subsystems. The second one is that monolithic development is typically very slow. We will typically say, hey, we're going to come out and we're going to launch this new platform. It's going to be 3 years and a hundred bazillion. And this is what we're going to do, and we're going to focus all of our effort, because we think it's really going to move the needle. In the meantime, everybody else who's generating the revenue for the company, are having to support this really big project. It's really expensive. It's high-risk, and it's just obviously not the best. And so these are the negatives. So, this is the enemy within. This is something that we have to fight. So, I'm going to show you how we are doing that. So, setting that up as the bad guy first is we need to make sure that we build to deliver. And I just brought this one up and you guys have seen this. This is a Fireware, I don't know, what is it fire -- what did it call the little cable, lightning cable, right, for iPhone, right, or USB 3. What's amazing about these cables is you can buy them for pennies, definitely less than $1. And you know what's amazing about it, they transfer a lot of data and they deliver power. You know how many 3D printing companies use these to deliver signal and power in their architecture? Nobody, because we're making a custom cable, right? Because we think we know better than the rest of the world. And so what you end up doing is you have a lot of engineers developing a lot of things. And one of the phrases that I've picked up from one of my engineering friend, they always said COTS. I thought cots is like the thing you sleep on when you go to summer camp, but he said, no, it's commercial-off-the-shelf. Well, the thing is, is using commercial off-the-shelf allows you to focus your engineering resources instead of making special cables that's going to deliver data and power to your sensors, why not just use this cable and spend your time making better sensors, right. And -- or using those sensors and developing better controls. So, that's one thing is we need to think about building to deliver. The other one is we need to manage the speed. And again, all 3 of these, I'm going to do a deep dive on. And ultimately, as everyone's echoed since Jeff's presentation all the way through, is we have to focus on applications. What typically happens with an engineer when he starts solving the problem, he thinks he's the customer. Most R&D people in the world believe that revenue comes into the budget so that they can do research. I need money, I can't -- you can't cut my budget, because I need it to do research. In reality, we do research in order to deliver value to the shareholder, value to the company. And most engineering programs in the world, pretty much everywhere have it backwards. Those that do well in this world have it the right way, is the innovation is here to launch new products and add new value, you're not here to just experiment in a room and do cool stuff, happy engineering as one of my colleagues used to say it. So, the first one is built to deliver. Already use this one as an example. Right now, we would have, let's say, component A, let's say it's a cable. We're going to have SLA, number one is going to have the cable to do the same thing as a Figure 4, but it's going to be different as the SLS, which also is doing the same thing, and it's 4 different cables doing all the same thing. So, what we have to do is think about really -- automotive is probably the best example is, let's use common architecture. Let's use common interfaces. And what we can do is by doing that, we can take one component that can spread across all of our platforms. And it actually makes operations easier instead of having 5,000 spare parts that have to sit on the shelf, maybe I only have 2,000 spare parts sitting on the shelf. So, what we have to do is not only engineer the technology that's going to solve it, but we need to engineer the ecosystem around it. And ultimately, we need to engineer the mindset that thinks that way. So, what I have to do is start with a mindset and a process that our engineering staff is thinking about solving the problems in a real world way, not just their way. And so that's where it comes into the next one is how do we manage for speed. And here's -- I don't know, anybody read -- complex adaptive systems, anybody familiar with that phrase. So, here's 2 ways that engineers or technology companies solve uncertainty. When you're going into something new, how much is it going to sell, how much is it going to cost? What's the productivity. When you start on day one, you don't know. And so you can go to one way or the other. You can go to chaos or you can go to order. If I'm going to go to order, what I'm going to do is I'm going to build a really long requirements document, and we're going to solve all the problems. We're going to get them all out there, and we're going to solve them today. And we're going to fix the quality, and we're going to fix the requirements on day 1. And so once we set that bar, if we don't achieve that bar, then what we'll do is it will just take longer and longer and longer. So, typical waterfall methods used -- they go towards order and so we're going to order everything. And in ordering everything, you're not adaptive. So you're marching along and you come across a river and there wasn't a bridge there. Well, we didn't know that. Well, if you would have just gone left, there's a bridge down the road on the left. Just aim towards that bridge, well, we didn't know that, so we're building a bridge. And so what happens is waterfall ends up costing longer, and you missed the target. The other one is chaos is we just stay in the lab forever, right? We're just doing happy engineering. We're trying to solve all the problems before it ever gets to the product, and we're not able to connect those. So what we try to do is agile. Agile goes around an application. And what we do is we generate, we -- hey, the young guys the people that have grown up in today, they use the word hackathon. It's -- it used to be a made-up word. Now it's probably in the dictionary. But a hackathon is just, can we get something to run? We're going to stay up for 24 hours, can we get it to work today, right? And do it once. And I had a professor say this about thesis or dissertation or if it's art or if it's a book, the key to writing a good book is write a bad one first and edit it 1,000 times. So we're just taking that same methodology and going into that. And so what we're doing is we're aligning around agility. The last one is typically the engineers think they are the customer. And sometimes our sales people think they are the engineers. So sales people will tell the engineers a better way to design the product. Of course, it's already designed. It's already on the shelf. It doesn't help us today, maybe in 18 months. So what we have to do is we need to make sure that the applications is at the focus, but that we're integrating what we know in the field and through our health care and industrial segment that Reji and Menno just discussed and how do we integrate that? So you saw a lot of people talking about these customers, they're in -- they're in my group. We've moved product management applications next to our engineering. Before, engineering thought its only job was to do new product introduction, right? We're just launching new products. As far as sustaining products, good luck with that. And so what we're doing is putting applications and product next to it so they can solve real-world problems in the right way, and we have a feedback loop within our industrial segment and our Healthcare segment. So again, it's a little more iterative. It's a little more interactive. It's more collaborative. And so we think that we'll be able to do that. In doing that, these are some of the materials that we're also launching, and I'm going to end on a case study. I'm still going to finish, about 30 minutes. So here's just some material. I'm not going to read all of this. I think we probably have 30 new materials that we will launch this year. And one of the great things about having a broad portfolio, and this is industry-wide, is you really have an attachment rate of about 80% of materials on whoever that sold the native platform. So if Stratasys sells you a platform, even if it's an open platform, the tendency is 80% of people just buy the materials from Stratasys because they're used to it, or they're a customer or they're in the system or they trust it. And so one of the things that we're going to continue to do is look at ways that we can leverage our materials, not only internally but externally. So we think we've got some really good materials for the world, and so we will continue to work on launching these materials. And part of that kind of agnostic bent is, what if we have a really good material on Figure 4, can we get it to work on an SLA. So that's some of our development effort, is to utilize materials across platforms. Because if you qualified it on a small figure 4, but you've got a big application and it's a similar material, you have to requalify it. So I think it makes it more efficient for our customers and for the applications ultimately. But these are several of the materials. We've got 1 is a DuraForm PA material that we're excited about. It gives you some really good elongation. It's great for snap-fits, it's great for -- it's not going to break when you drop it. It's a little lower cost. And so we think that this is going to be a very competitive product. And we continue to work. Again, our strength has been stereolithography, and we will continue to focus on our strength. But we will also do other things as well. So the next thing I'm just going to talk a little bit. You've already seen the slide, so on the bottom left, the Explorer, all the way to scale, you saw that, I think, on Reji's slide, potentially even on Menno's. So what our application engineers do is they are the first user. They know the pains that our customers will go through and they walk through them, so through that with our customers. So first thing is the function. Really, they help to accelerate. So if we have a customer who wants to do something, we work with them to accelerate it. The other one is we're really looking at what we're doing. And again, some of the examples is be able to take what we've done and launch that outside. And again, we think we've got a very unique position because we have a very strong applications group. And honestly, the senior management that I brought in to work with me at 3D Systems has some names of people that are good practitioners. I myself can -- I'm one of the few executives in the industry that can probably go out there and run a machine. And so it really makes a difference when we're focused on applications, is I know how to drive the car that we're making. Here's -- and here's an example of how this all comes together. So I'm going to end on this with a conclusion. So here's our case study. So if you're at the show, we're going to be showing you the new SLA 750. And so it was an internal project. Even though we've been making SLA for a long time, they just took a new approach. And so if you look at the bottom, I love this picture, I asked them to include it. It's the junkiest picture. It's really fascinating. But if you look -- and I got it to point over here -- at the very top, it says legacy printer. It shows, back there, you see a legacy printer. And it also says storage on top of printer. People are using our printers for storage. They're making 3D printed parts to put little lens wipes and attaching it to the monitor. They're -- by creating these little tags to say what the resin is and they're actually putting that and taping it to it. Well, we've got a group that's UI/UX, and this is what they do. They actually go to a customer and say, how are you using the machine. And when you know that, that's the way they're using it, well, what if we integrated some of those solutions into our development instead of just doing it. And so this is something that our applications team really helps us do, is really get that customer input and feedback, identify key customers, we can put our engineers close to them. And we can actually -- and it's a lot of -- it's an eye chart. But what it's able to do is we can actually map out the workflow and see where we can eliminate the waste. Because ultimately, for all of us in this room, the enemy in 3D printing is scalability. Can we get the efficiency at scale? Can we make mass customization as cheap and as functional as traditional methods? And that's what we are working towards. We're not going to get there tomorrow, but we're going to work at it a little bit at a time. And if our design cycle is every 3 years, Stratasys or 3D Systems or whoever comes out with a new printer, we're never going to get there in our lifetime. So we've got to start thinking in 18 months, 12 months, 6 months. So we have to iterate faster. And so this is something that we think is going to help us do it. So not only -- so when we launch this, we're doing all of this. So you can print it. We also have a way to transport it. We're working with key vendor partners to be able to clean it. And then we've also developed our own curing oven that integrates both heat and UV wavelengths. And it's multiple wavelengths so you can actually tune the heating process and the curing process to get -- a lot of times, what will happen is some of these resins, you cure them, UV. And then you go and harden them in an oven and heat them. But the problem is, is the heat transmits differently as the polymer changes and gets more -- thermally, there's cross-linking and all this stuff. And so if you can tune your thermal cycle and your curing cycle to coincide, you can actually get better mechanical properties, less distortion. So the conclusion here, ultimately, number one, we've got the broadest technology. That's a good thing and a bad thing. The bad thing is it can lead to distraction. And so complex adaptive systems is we have to allow for our organization to be able to be flexible to go and work on the systems that need to be worked at the right time to hit the market at the right way. The second one is that development process that I've already talked about, enhancing that development process. And then the last one is really going towards modular components. Don't have to reinvent the wheel. Don't -- do you know how many wheels we reinvent? we reinvent a lot. We make our own gears, we make our own stuff, and we could have bought it off the shelf. And the thing is, is we'll use a 1-inch gear on this one and a 2-inch gear on that one, and we have to stock them all. So that's something that we're going to do that hopefully improves our efficiency as well as decreases our cost of goods, which can generate better margin. So faster product development cycles are going to help all those. So anyway, that's it, and I'm going to leave it to Wayne to do cleanup. So any questions while Wayne comes up? All right. I'm around this evening and this week, if you want to talk.

Thank you, David. I will say one thing. If you're looking for the protagonist in my story, it's profits. All right. So it's been 2 years now since Jeff became CEO of 3D Systems. And the company has really undergone a remarkable transformation over that period. He quickly changed the focus of the company to applications in high-value markets. We simplified and reorganized the company to 2 verticals, health care and industrial. We restructured the cost base in order to better align the costs with the revenues. And then we divested the noncore businesses. And that resulted in about $420 million of cash proceeds in -- last year, in 2021. We used that money to strengthen our balance sheet, but we also used that money for acquisitions. There was 4 acquisitions made in 2021 that used, I think the total value was $240 million, of which $140 million was in cash and about $100 million in common stock. Anyway, so it was really all those actions that took place that 2021 realized the benefits of it. So for 2021, when you look at the results, our revenue was $544 million after adjusted for divestitures. That's a 32% growth over 2020 and even a 17% growth over the pre-pandemic 2019 levels. Our gross margin was 43%, and we had healthy EBITDA of $56 million after adjusting for divestitures, which was $66 million better than 2020. If you take a look at our revenue profile, if you look at our 2 segments, health care and industrial, they're about the same in size. We have about 64% of our business in what we call recurring revenue. And recurring revenue is primarily driven by materials, services and software. So the nonrecurring revenue is primarily printers, but printers actually drive recurring revenue. So if you look at this model, basically for every dollar of printers sold, that will generate another $3 of recurring revenue over the life of that printer, okay? Some of that comes from software. Right now, it's a small amount. We're hoping that amount gets bigger. We have services and we have materials. Materials is obviously the largest piece. We have over 130 proprietary materials. We will continue to innovate in that and hopefully drive that even further. So again, for every $1 of printers sold, there's another $3 of revenue that's generated over the life of that printer. So this year will be a year of investment, and these investments should drive multiple growth opportunities. In this drive, we're expecting double-digit revenue growth over the midterm. First one is the obvious, the application focus in high-value markets. We're going to continue to maintain and enhance our broadest technology portfolio. And really, 3 components of that. It's product refreshes on our technology, which provide the best balance of cost and functionality. And that's really what David just talked about. We'll continue to invest in materials to enable new and innovative applications. And our software should lead to capabilities for the entire additive manufacturing industry, and that will be another growth driver. We have the scale to support customer needs from inception to fleet production, and I'll give you an example of that a little bit later. And with respect to regenerative medicine, which you'll see tonight, we've made some amazing developments in that, but it's still early days in it. And while -- and hopefully, someday, it will be a game changer. So when you look at application innovation, it really is the cornerstone or the fueling of our long-term growth. And think about it in 2 places. One is the established markets such as orthopedics, jewelry, dental and aerospace. But it's also in emerging markets where we have things like electric vehicles, connectors and then oil and gas. So it is a fundamental to our growth. In terms of scale, how we grow, we talked about for every dollar of printers, we get more revenue -- recurring revenue in material services and software. The question is, can we also expand our customer base. If you look at the mix of our customers, we actually have a good mix between new customers and existing customers. Obviously, new customers contribute to revenue growth, but so do existing customers. We have a fleet that we service of printers, that's roughly 20,000 printers. About 8,500 of those printers are just the one at the customer. But we also have over 1,500 customers that have 2 to 4 printers, and we have over 400 customers that have 5 or more printers. So those 400 customers average about 17 printers each. So if you look at customers with 3 or more printers, those number of customers over a 5-year -- have a 5-year CAGR of 11% in terms of the growth rate of those customers. So we're continuing to expand with those customers as well. All right. So now we get to long-term financial targets. So we've spent the time talking about what are sales growth drivers. We think and we believe that, that should grow to about $1 billion in 5 years in 2027 from -- if you take the midpoint of our 2022 guidance, that's a growth rate of about 10 points -- that's a CAGR of about 10.7%. If you look at industry forecasts, when you look at the broad forecast for the additive manufacturing industry, it's about 20% growth rate. If you look at the markets we service, -- and I think Jeff actually showed it earlier, it's about 1/3 of that. That 1/3 of the broadly defined market grows at about 12%. So there's no reason to believe we're going to grow less than that, than the industry. And so if the industry forecasts are correct, we would believe that the $1 billion would be a little bit conservative. Also to be clear, the $1 billion does not include any revenues from regenerative medicine, because it's just too early days to predict when it will hit. We have gross margins we're targeting at 50%. Today, that's -- so we're a ways from that number. In terms of how we get there, it will come from printer standardization to reduce their cost of goods sold. David just talked about that. It's the mix shift to higher-margin software offerings that Ben discussed, and we should get some scale leverage from our supply chain as a result of that. We have R&D at about 10% of sales and SG&A at about 20% of sales. That implies about a 4.5% annual growth rate from our current spend for both those items. For SG&A, we do have a number of investments to make this year and next. But those will lead to productivity improvements. So between that and just the scale from higher volume, we're very comfortable that we can hit those targets. So if you add it all up, that would give you an operating profit of about 20%. We do have depreciation, which runs 3% to 4% of revenue. So if you added the depreciation to the operating profit, it should be a easy to get. You'd actually get EBITDA a little bit above 20%. We've kept our target at 20% just to be conservative. So actually, I'm going to stop for one second. I just only have one more slide to wrap up. But does anybody have any specific questions on our targets? And if you're raising your hand, I can't see you. So yes, go ahead.

I'm just wondering how think about the bridge to those targets, if -- should it be gradual or new products that should drive growth in years 2, 3 as we think of the targets...

Yes. I'll put aside your view of the economy for the moment, and there's no reason to think it shouldn't be relatively linear. But we're not going to forecast it year by year. I think you'll see software probably picks up towards the later end.

If you've got questions for Wayne on the financial model, it is a good time to ask them. Let's pause for a second with Wayne, just to give you the microphone. So you can focus on the web here as well.

Okay, great.

Other questions for Wayne...

Noelle Dilts. If you had to look at those 3 drivers of margin improvement, is there a way you could kind of rank them or size? How do you think about the opportunity associated with each?

Yes. I wish I was smart enough to do that. I think the short answer, it's a mix of all 3. I don't think any -- they're not in any particular order, we need to do all 3. Okay. All right. So just to wrap up, why invest in 3D systems? You're not going to believe this, but the first ones are because of relentless application focus in high-value markets. We do have a very focused business. We have a strong balance sheet now. We announced 2 acquisitions in April. After those 2 acquisitions, our cash on hand is about $645 million -- excuse me, $665 million. When you think about cash, there's 3 things you do with it. You invest in organic growth, you do M&A or you return it to shareholders. So today was about investing in organic growth, and our targets are based on the organic growth. We believe there's huge opportunities there. And plus organic growth almost always has the best payback. With respect to M&A, we're in an industry with lots of opportunities. And so having some dry powder is actually a good thing. And then we'll have a broader -- we'll have a discussion on capital allocation at a later date, with respect to the last item. We've demonstrated double-digit revenue growth, and we expect that to continue in order to hit our target of $1 billion. And we expect our margins to continue to expand through the scale or product mix to more software margins, more software and a refreshed product portfolio. So with that, I'm going to turn it over to questions. If I can ask my colleagues to come up, that would be great. And I will ask the audience the first question. What is the capital -- what city is the capital of orthopedics? Did I get that right? The orthopedic capital of the world, where is the orthopedic capital of the world? There you go, Warsaw, Indiana. All right.

So while everybody is kind of collecting their thoughts for a minute. The reason we really pound on this application focus, guys, is any business, and in fact, I think any person in their individual life, you can only ever have one true priority. The mistake I think people make is saying, Well, I've got multiple priorities. Yes, you do have multiple priorities, but you only have 1 #1, right. Remember the old City Slickers movie that I forgot the guy's name on the horse. He all did this. The young guy said, yes, he said, you've got to figure this out, whatever it is. What we are truly good at from the beginning of our company, when Chuck Hall founded this company, we're at our best when we're application focused. And if we use that, we make our customers happy, and it drives our technology, okay? It's what we're doing in regenerative medicine that you're going to hear about tonight. It's what Reji and Menno ran through today. That's why we say it as a mantra over and over, application-focus. Before we launch a new product, we say, what's the application? What are you trying to solve for? Before we launch a new material, we launched more materials last year than this company did in the prior 3, okay? Every one of them had an application focus. Every one of them was directed toward a key customer solving an application. Now pick it wisely so that more customers share that need, that's great. But you have one application you're trying to solve for and it drives your growth. It's a sustainable business model. Now the problem a company generically would have with that is if you don't have a broad enough technology base to go after those applications, you're in trouble. We do. We've got metals and polymers. We've got a wide range of proprietary materials. We can also use off-the-shelf materials if we choose, and we have a market-leading set of software to go after them. We drive that based on the applications we're going after. And then we count on that being applicable to a broad range. We're doing it today in semiconductors, okay? We picked one leading customer in semiconductor equipment manufacturing. We solved their problem. Today, Reji, I don't know how many of the -- how many components do we have with our leading customer in semiconductor?

And what we've done now is we've moved from working with the one major OEM to now we work with the top 5, the top OEMs in the world based on that initial application.

That's how the model works. So we picked the #1 guy that's really aggressive about embracing additive manufacturing. We solve his problem. And then we solve multiple problems for that same person because they like what they got. Then we apply it to everybody else in the industry. We own the IP for the printing, the materials, the software behind it. The customer gets the application, the process workflow, it works like magic. It's driving double-digit growth for us today. Because of our scale, we can do it on a sustainable basis. And I think we can do it better than anybody in this industry. That's the key to our success. The other thing I would tell you in the summer of '20, we had to pick what to work on. And we used that as the mantra, application focus. But we had a number of problems to fix. So there were 3 cultural attributes we adopted as our mantras: candor, focus and speed, among the executive team. It was COVID, so we spent a lot of time together, right? We basically isolated together. And we said, Okay. Let's be candid. What's not great about the company, what's screwed up? What do we need to go fix? Focus on that and go after it hammer and tongs, go after it with speed. You might miss a little bit, but you're going to make significant progress. Candor, focus and speed. And if you look at our culture now, what we've added to that is employee engagement, diversity and inclusion, things that make people want to work with their colleagues, things that make people want to be attractive to the company. That's how we're attracting seasoned talent back to 3D Systems. That's how we're attracting young people out of school. Last year, we had an intern class, summer intern class of 25 kids. We had 1,800 applications for 25 jobs, okay? In the midst of everybody crying about not having enough people to work for you, 1,800 applicants for 25 jobs. This year, we doubled the number of interns we have. We have 50 this year, okay? We have, on average, 100 applications for each internship because it's really fun work, it's really cool. It's really exciting, okay? Regenerative medicine approach we're doing exactly the same thing but plowing new ground. Okay. I appreciate everybody coming. Questions for anyone. Jim Ricchiuti. And bring a mic up, if you would, to the folks on the phone. Yes, bring a mic up for Jim. But Troy, you've got one. You want to go?

This is Troy from Lake Street. A couple of questions for David. I was going to ask you about other technologies that you're missing, specifically high-speed sintering and powder bed metal, but you talked about both in your prepared remarks. So can you just go over both of them a little bit? So for high-speed sintering, I'm guessing you guys haven't gotten a license from University of Sheffield. Are you doing something different than their technologies? And help us out with time line for both and when we'll see those products.

Well, I think to be clear, I used those as examples. I didn't say that those were specific. I just said we have the technology in-house if we wish to pursue that. I will say that our CJP, which is our C-Corp platform, typically uses a gypsum and we use a colored ink on the gypsum. I will say this, we will be doing more than gypsum and colored ink on gypsum on that platform. Beyond that, I can't say specifics. What we've done in our technology group is we do discovery and then we do development. In the history, typically, what we would do is we would roll discovery into development to say, hey, we want to go after high-speed sintering, or we want to go after a metals binder with the metals, right? So that's discovery and development at the same time. Two elements of discovery is, one is, can we do it technologically. Two is, is there a market for the technology we would like to develop. So we will be doing technology and market analysis over the next 6 months. If you look at that, that's a little later, it's not today, it's a little bit later, and we will be looking into that. And so I think that's what I can probably safely say.

All right. I have a few more while I've got the mic, if you don't mind. How about support less metals as another capability that you guys talked about that I -- haven't launched yet officially.

So we do have that. We've just branded it, and so we will start to beat that drum. And so we -- all of our metals applications through our software allow that. I don't know about software integration so that what we've learned can then go to other suppliers. But I don't know if you want to speak any...

Yes. So it's a -- so the supportless printing is a generic capability in the [ trajectword ] software. It can be adopted by other vendors as well, but there is, of course, a lot of process development that comes with it, which is specifically where 3D systems has invested extensively in the last couple of years to really make that work really well.

So then we have one follow-up for Ben, and then I'll hand off the mic here. But -- so with respect to machine learning and the machines, I guess to me, I think of FDM and DLP as something that you can scan while it's being built. But if you think about SLS, DMLS and SLA, the products are getting embedded, right, in the powders or the resins? Is it harder to do machine learning, AI capabilities in those technologies versus FDM and DLP?

Not necessarily. So machine learning can be applied on like various sensors. It could be image-based sensors, it could be temperature sensors or forces during the build process. So no, it can also be applied to these other technologies.

Thanks, Troy. Jim.

I'd like to pursue this recurring theme about application engineers and the group of 80. How are these folks being organized? Is it -- do you split them up industrial, health care, are they -- you're bringing talent in based on that specific application? And how are you leveraging it?

Very good question, Jim. So I'll comment on that. And then David, maybe I could ask you to comment on that as well. And also the other guys, if you'd like. It is the heart and soul of our business. Application engineers bring the technologies together, they develop the process to solve an application, very, very talented people. We've got a large number of them, I think, the industry largest, over 80 dedicated process engineers that are working on applications every day. Many of them have broad enough skills that they can address both industrial and health care needs. So we try to -- every company has to watch its cost as well. So we try to spread the resources across market verticals if we can. They exist as one group, they're managed as one group. But inevitably, people take on specialization. So you end up migrating smaller numbers of people toward health care or a subset of health care like orthopedics, and then also industrial. So you might migrate toward the wafer manufacturing machinery applications [ where all our ] aerospace is a good example. So you tend to have a few specialists, but we try to treat that as a group as broadly as we can to get the most out of the resource. But it is the key element to our success as a business. David, do you want to comment further on how we manage them? By the way, they're accounted for in our SG&A, they're accounted for as a sales cost, okay? They're not measured as a P&L. We took that away. They are a sales cost. That's how we account for them. Managerial wise, though, they roll up to David under the engineering organization.

Yes. So there's a matrix. So there's one is what -- as you looked at one of my slides and one of Reji's slides, you saw about engagement all the way to scale. So that's one way that we organize. The other one is discipline. Just like any organization, you have mechanical engineers or electrical engineers. Well, in applications, you've got aerospace. But aerospace could be investment casting, which is done in other places other than aerospace. And so what we do is we generally align them in those 2 matrices. I'll say there are 4 regular ways from scale, the first one is what we would call customer engagement. So we have our customer innovation center, which is where we work with customers on building benchmarks, working with them on engagement at a trade show like today. Or tomorrow, you'll see a lot of applications people that will be at the trade show, to answer questions, to be a resource for our sales and our marketing teams as well as going to key customer visits. So that's the first layer as far as applications focus. There's a group of people being managed by one of our application engineers in that way. The second group is what we would say is really enabling, where we then go in and maybe do consulting. You want to do a thing, you want to buy our equipment, but you need some work on design for additive or whatever that is. So we also have more of a consultation version of that. That's the second one. The third one is one that's more kind of designed for additive, understanding that we have UI/UX. You saw that embedded in that picture with all the Post-It notes. And so that group actually makes sure that we have applications embedded -- application engineers embedded in each one of our technology teams so that we can take the information we have and be able to scale it through launching better technology. So it's better sensors or a better door or a cleaning thing or whatever it is that the customers need, we try to embed that. And then the last way is scale through production. Reji talked about that with one of the customers. It's very much embedded in what Menno does in medical, is where we can start with production, and then we can launch that production to our customers. We can stand side-by-side with them as they scale their production. Or if it comes into someone like our medical, we'll actually do the production. So it's those 4 areas that we focus our applications engineers and then across that, the different functions. So we will then hire like a specialty -- we'll say, okay, we need an aerospace application engineer that's in metals. And so we will hire people that do that, but then we plug them in, in that ecosystem. Hopefully, that made sense.

Last question for me is just, I was wondering if we can go back to that served available market, the addressable market. And obviously, we don't want to go through every bucket. But if you highlight in health care and industrial, where you think the strongest, most attractive growth rates are and where you think you've gained share just -- or where you're really focusing on driving share that you think you can gain share over the next year?

It's really intriguing question, Jim, because I would have told you a year ago, I would have guessed -- that pie chart split of our revenue today, it's split 50-50 between, roughly 50-50 between industrial and health care. I would have told you, health care will probably outpace it. And in answer to Noelle's question, that carries a higher gross margin generally. So it would have been part of our gross margin lift. Health care is an incredible business. Today, I would tell you, I think the market for health care is probably smaller than industrial. I think industrial is bigger. And I think because of that, and its adoption rate is probably growing faster, but it's not grossly different. It's bigger and growing faster. And I think it will continue to do so. But the benefits in health care are tremendous. This mass customization in health care because you think about it today, and this is why we formed our Medical Advisory Board and Steve Klasko is chairing this. Hospitals are under tremendous pressure to improve patient outcomes and reduce cost, okay? In part, that means reduced infection rates, reduced recurrence of people coming back to the hospital. I'm sure a lot of you have known people that have had knee replacements. The number one thing that fails in knee replacements is infection. Somebody gets an infection, has to come back in. Sometimes they have the whole thing replaced because they're infected. The use of 3D printing to -- on a mass basis, to customized orthopedic implants improves patient outcomes, gets them out of the hospital faster, reduces the recurring rate and it increases the productivity of the surgical suite. It was interesting, when I lived in Minneapolis, my next door neighbor was one of the leading orthopedic surgeons in Minneapolis. And I would talk to him, he'd go in, he'd leave at 6:30 on days he worked. He would leave at 6:30 in the morning, then I'd tease him on many days he wasn't working. But he'd leave at 6:30, and get home like 6:30 at night. And I'd say, how was your day? He said I had 12 patients come through the surgery today, 12 patients come through the surgery. I said, "Wow, I said, "So what do you -- how are you measured? How do you -- how does your boss -- how do they measure you? Throughput. Throughput and rate of recurrence. He said, we have to have patients come through 1 time, leave the hospital well, and we have to have higher and higher throughput out of that. So you don't think about productivity in hospitals as much. But if we can customize an implant, just in orthopedics, customize an implant so the patient gets out faster and they have reduced rate of infection. Just using that as one metric, and you have a higher throughput in the surgical suite, everybody wins, and the payoff is enormous for everyone. Reduced insurance rates, increased profits for hospitals, patients happier and more of them surviving and recovering from surgery. I love health care. It's a hard business to get into. It's hard to be good at it. But once you're in, as we are today, between FDA restrictions and approval requirements and process control and quality, huge barriers to entry. And the benefits additive in health care is so high that I think the adoption rates are going to grow and grow and grow. Now is the overall market bigger than industrial? I don't believe so. And I think industrial will really grow as aerospace, automotive, as the throughput and productivity because if some of the software improves, a lot of higher volume industrial applications will really take off. Now will they carry the gross margin that a health care business does? No. But the embedded cost, like the FDA process approval is not there. The embedded cost to deliver that product is more -- is attractive. So we love both businesses. We love industrial. If you look at the last quarter, we grew 15% in industrial, 15%. Health care, we grew at a lower rate, but margins overall are better in health care, for good reason. So we love both businesses. I'm guessing net-net, our revenue splits will remain roughly the same over time, is my guess. Because what it will mean for us is in industrial, we'll pick our markets carefully because I think -- frankly, Jim, I think there are also markets where it's going to be really hard to make money in, like anything. I think some of the markets that value design differences less, they won't pay as much for additive. So those markets we'll avoid. That's why we're avoiding some of them today. But if you look at aerospace, electric vehicles, some of the high precision castings for rocketry, even jewelry, they're really value-additive and it leads to a faster adoption rate and reasonable margins. Long-winded answer to your question, but it's a very interesting one. And I think all in all, both businesses for us are going to grow really nicely. Yes. Right up front here, Melanie.

Chip Skinner with the Royce Funds. Good presentation. Thank you. You mentioned software would be one of the drivers for higher margins in 2027. What percent of revenues is software today and what percent do you think it will be in 2027?

Our recurring revenue percentages, and Wayne, I'll ask you to clarify in a minute and correct me where I'm wrong. Recurring revenues today are 2/3?

Yes, 60%.

Roughly 2/3, 60%, roughly 2/3. In that recurring revenue today is a software component and there's a materials component for consumption. Materials will continue to grow, but the biggest growth area, I think, Chip, will be software. Software because customers want to run fleets of machines, and it would be very arrogant to think they only want to run 3D Systems fleets of machines, okay. I'd love for them all to buy our stuff. But some of them aren't going to want to. There are some really good competitors we have with new very interesting technologies. They're going to want to salt in some of their printers as well. So one of the beauties of Oqton. And the reason we firewalled it off and we're keeping it separate is, we want customers to adopt additive broadly, okay? Yes, it's good for us. We'll have more recurring revenue from software. That's great. But it will help everyone sell printers, sell recurring materials, everybody else benefits as well. Customers will inevitably have big mixed fleets of printers. We'd like them to standardize on software to try to make it all more efficient, but that's how they're going to get the economics of additive in the long term. So if you looked at that bar chart, today 2/3 of our revenue is aftermarket. Software is a smaller component of that, much smaller than materials. It will grow disproportionately quickly. And in answering Noelle's question, the biggest lever we have in driving gross margin over the next 5 years is software sales, software sales, by far and away. And it's a recurring revenue model, a cloud-based subscription model for software.

And I noticed -- can you hear me? I noticed on one of the health care charts with the products that Oqton was on a number of those products already. But you just acquired it in November. I was just curious, why is it already being used or used with? And how easy is it to integrate that software with your other products?

So I'll start the answer, and Ben, you can actually answer it better. So we look to -- so what we were hearing -- here's the history, we were hearing from our customers starting 2 years ago. As soon as COVID lifted enough for me to go see customers, we went to see them. And I remember one specific trip Reji and I were on, to an industrial customer. And he showed us the factory area that was empty. He said, we're going to put a fleet of printers in here. And in fairness, guys, some of them will be yours. We like some others too. We're going to have them all in here. And I said, well, what's your rate-limiting step putting them in? And he said software. He said, we have no good way today to put -- even from the same supplier -- multiple printers in here and post print processing, robotics, all the things that go with modern manufacturing. If you go to traditional machining operations and things like this, good ones, you'll see machining, but you'll also see robotics that automatically move the parts and all of that. He said, today I have to hire so many engineers using Excel spreadsheets to schedule the parts through, to track them through, and there's no real automation in there. So everyone talks about intelligent machines themselves. And I'm proud of what we've done to make our machines really smart. What was missing was the ecosystem. So we said, well, okay, we've got a lot of software engineers. We could put them to work developing an ecosystem. We looked at that and we costed it out. Or we could go out and try to partner or acquire something. We evaluated many, many options. This goes back 1.5 years ago, and it was very clear Oqton had a huge leap on everybody else. They had the right vision, they had the right focus, that -- it brought along additive printing, but it had [ post-print ] processing, it had machining, it had robotics that could all plug into the same ecosystem through APIs. And in that ecosystem, I'm putting this in my layman terms, but it's the ecosystem could plug into the factory system. SAP, Oracle, Microsoft, whatever they were running, it could plug in. And then you could plug all the bits and bobs in the floor that you wanted. You could plug it right in, and it would all automatically sync up and run together, tracking the product. And through embedded AI, it could optimize the workflow through the process so that the customer had higher throughput. It wasn't all finished yet, but that's what has been demonstrated, and that's what the promise was. So we said, look, what the best path became, let's acquire it, let's firewall it off, keep them independent so they can help everybody in the industry and then finish what they started. Go out and finish all the pieces and then let everybody sell it, let every customer buy it and create that same kind of system like SAP and Oracle and the others, but we won't displace those, we'll be compatible with those. So Ben, I'm sure I just said a litany of things that were [ extraction ]...

Yes, so like integrating the 3D system printers. So before we were acquired, we already had several customers with 3D System equipment that we were working with. So we already had some integrations and actually production use. But then once we -- once the acquisition closed, like in 3 months' time, we connected the whole fleet of different equipment that's available. We were able to do that very quickly, largely because of the platform was open and it's -- and the software teams are integrated and it was -- we were able to do it really, really quickly.

So let me say one thing, and then I'll let you finish. So we made the strategic decision because it came up right away. Well, okay, we're going to let everybody buy Oqton and sell Oqton and do all that. What about our core software for printing? And we had already talked about relationships with other additive OEMs and things and should we license it and all this stuff. So we made the decision, look, let's just pack it all in and give people the option: they can buy and sell Oqton itself, which is the framework, or they can use any piece of the software that we've developed ourselves. Make it all cloud-based, make it all linked as options. And people can have a menu of items. Maybe they have some other software they want to use that they've developed, but only one piece of the puzzle. But they can get the rest of the piece from Oqton in total. So we pushed it all into Oqton. And say now it's all available to the industry. Wayne?

Yes, I just want to make one clarification. We do not separately disclose our software sales. Software rolls up into industrial. And it's part of the reason when Jeff says, hey, they're going to end up roughly the same size, no expectation of difference in the last 5 years, is because the software is all in industrial.

Great question. Yes. Greg?

Greg Palm, Craig-Hallum. Sticking on the applications focus, I think we're all familiar with how successful you've been in dental, specifically with a large aligner company. As you look ahead, what types of applications use cases could be as big as that opportunity in aligners, and what are you most excited about near term?

Yes, it's -- I will ask actually, I'm going to ask Reji to comment on that because we talk a lot about it internally. I would tell you it gets into some pretty sensitive discussions because we're bringing along -- I would tell you, Greg, quite honestly, we're bringing along 2 or 3 customers, which could be larger than our largest customer today in terms of the applications. It takes several years to demonstrate and implement and scale. If you look at how long that customer has been ramping up our technology, it's been a long time. So it takes a while -- but our challenge now is to bring other customers to that same level. So we're engaged with those kind of customers that have the potential to consume that much of our technology. Where it's at exactly, frankly speaking, and I hate to say it, it's a bit sensitive because obviously, we don't want other people to go out and try to take the same approach. We're already hearing echoes back daily about application focus and all this other stuff. I don't want to give it away that here's customer A, B and C, you should go take that approach with. Reji, anything else you want to add?

I think one thing we can think about here is related to not the customer itself, because we can't speak about those, but what's enabling that. So for example, as you think about material advancements, as you think about fire retardant material, it opens up a lot of opportunities for us. As you think about machine precision, it gives us a lot of areas that we can really extrapolate and grow fast. Quickcast, for example, and even in broad stroke because like if you think about energy and things like that, you see out in the back room back there with respect to the drill bit that was done on a Quickcast, as we build those capabilities, and that's what David is working on and what Ben are working on, it opens up a lot of areas where we can really help customers grow fast. So we have several of those that we're working on now. It's just to the point we said we're kind of keeping quiet.

Greg, the other thing I would tell you, one of the greatest things about our company, one of the things that differentiates us is we develop a lot of our own value-added polymers. And that inevitably -- polymers off the shelf out there were generally developed for injection molding. That's -- and they -- all of their characteristics, the process parameters, all of that injection molding and to get the right properties out the back end. Only now are we really ramping up materials that were specifically developed to use additive manufacturing for. The reason we're so focused and we're proud of what we did last year in terms of materials launch, is those materials were developed for additive manufacturing. So customers can print parts, and it's not -- Reji mentioned one parameter, fire retardancy is really a difficult parameter because what you do to make something fire retardant generally screws up the mechanical properties. So you've got to balance it out with other additives that make -- that give you strength, toughness, the ability to hold shape and be stiff enough. So it's a balance of those properties you have to try. So the reasons customers come to us is that we can not only provide a printer, we can provide a material and a process definition to give them the parts they want. And that's what we're doing to cultivate higher-volume customers that have the potential to be equivalent to our largest today.

Makes sense. And then my second unrelated question is, I think you mentioned that regenerative medicine is not a part of the 2027 targets.

Correct.

Is that a byproduct that you don't think that revenue is going to be material at that time? Because presumably, there's a lot of costs that are going to hit the P&L no matter what the revenue profile. So I'm just kind of curious, what was the thinking behind that?

So I'll give you 2 answers to that question and they're a little bit in opposition to one another. One of them is the timetable to get products approved by the FDA, the 3D printed organs and soft tissues and things, is it's a long process to get there. But the real reason we're not showing '27 revenue is that it's -- the steps to go through, the timing are still dependent very much on the day-to-day lab trials. So if the trials go well, we can start seeing revenue in that time frame. If they stretch out, it could be longer than that. It's just too variable. And quite frankly, Greg, the numbers are so good on their own. I don't think we need to include regenerative medicine yet, honestly. If we included -- if you could actually see the projections for regenerative medicine, when it hits, it's eye-popping. It will dwarf -- when they come to market and are approved, it will dwarf the entire rest of the company. I will tell you. Now what year it will happen? I can't tell you. I don't know. But -- so I never encourage people to invest today for regenerative medicine, but there will come a time where we say, now, we've gotten through enough trials, you guys should do it. You should invest because now we're entering clinical trials that are more predictable and we have high confidence that it will be approved. That day will come, but it's not today. And I love the numbers we can show you for our current business projections. I think it's an extremely healthy business. A $1 billion company doing 50% gross margins and 20% EBITDA margins, I'd personally invest in all day long. And I have. Other questions? Yes.

I'm Hugh, I'm a private investor. The company has $670 million of cash, but it has $470 million of convertible debt. And unless the stock goes to, I think, 35 is the number, that debt is going to come due, I believe, in 2025. My question is, are you willing to spend into a net debt position?

For the right return on it in the right time frame, Hugh, yes. I mean we put that cash on the balance sheet for a reason because we believe there are opportunities to invest, okay? Now we happened to go to market at a great time. We have 0 interest coupon debt until that time frame. But then we owe it back, right? So we have a window of opportunity here to invest that money with an idea of generating enough EBITDA to either refinance or pay the loan back. Alternatively, we can leave the cash on the balance sheet and pay it back then. So we can afford to be very opportunistic about investing our capital right now. And well, if there's one silver lining to the markets coming down, the assets are getting less expensive. So if you look at the returns, if you believe -- if you pick them right and you look at the returns, they should be favorable at some point here in a soft market. So we'll see. We'll see what we actually do with the cash.

And Hugh, we get another year, actually, I believe it's 2026.

2026. Yes. I am glad we went to market when we did. 0% is a good number.

Jeff, it's Brian Drab with William Blair. You put up a great slide about the production capabilities. I was wondering if you could just give us another level of granularity there. You talked about 1 million -- over 1 million parts per day. I've got a lot of questions around this. So I'm trying to figure out one that you'll actually answer. Well, I've been thinking about it for 10 minutes. So here's how I'm going to try it. I think that dental is the #1 application accounting for those production parts. Can you give us any sense for what percentage of the million-plus dental accounts for? And if your -- if the answer to that is no, can you at least say is it over 80%, over 70%? And then the follow-up piece of this is can you rank order the applications, maybe the top 3 or 4 applications that account for the 1 million dental being #1, 2, 3, 4.

So the only part of that question that I can answer, I can hide behind sensitivity. Actually, I don't know the answer to the next one, I can't [ Pareto ] out. I can tell you, dental is clearly, and it's not rocket science. Dental is clearly the dominant factor there. And we love that business. I -- yes, we have a very large customer -- but we have -- I want to believe, modestly, that we've helped them tremendously grow their business. We continue to do it. We love these guys. We direct R&D toward them, making them increasingly successful. We love the growth. We also learn a ton about fleet behavior, machine-to-machine variability, fleet behavior. How do you manage hundreds of printers in production 24/7? How do you service them? How do you keep them running? Machine-to-machine variation in a large fleet is a huge deal. So as we try to develop other customers, to rival them, machine-to-machine variation is actually huge issue, making sure that you can reproducibly print things over and over again out of multiple machines. So I'm trying to talk long enough to not actually have to answer your question. But no, dental's number one. I can't tell you what percentage it is. It's clearly a significant part of that number, and we're very proud of that. But there are several other applications in there that contribute meaningfully to that number. I wish I had them paraded out because I'd be happy to tell you, but I don't.

I have to push back slightly. Even if you don't rank order them, can you just say what the other few top applications that come to mind after dental are? I'm just trying to think of industry -- I'm not trying to put you in a tight spot. I just really want to picture what industries are biggest.

Another example of that is jewelry. For example, the number of pieces of jewelry that are made on the -- we've got hundreds and hundreds of those machines all over the world producing those every day, producing pieces for that every day. So that's an example of 1 of the other pieces in there.

And broader than jewelry is we have at least 2 technologies that can be used in the investment casting business, right? So our quick cast that you can see out there as well as our wax capability and our MultiJet printer, that lends itself to high quantities because each one of those will be invested to make a part. And so that's a very good recurring model is to be an investment casting.

If I could ask just 1 more quick one. In the video that you showed, that part for the semiconductor manufacturer, was that an end-use part? Or was that a development project?

That part, like, okay, I don't know if that picture of that, like the part that's out there right now is probably not the part, for obvious IP reasons. They're not going to let us take around the part that they're using. But that part is in those machines being -- that will be going. So those parts being done for semi capital equipment right now are end-use parts going in those machines. Those out on the back table are examples of those parts, right? They're not going to let us take the actual piece. But yes, so semiconductor parts are going into end use. Now it's not volumes of hundreds and thousands a day, as you can imagine, for the [ basis ] but the value of those parts are significant. The other -- obviously, we do a lot in motorsports, significant volumes all the time. I mean you're basically making a new race car every week. And so for almost every team in a lot of those things. So we're doing a lot of that every day. So there's a lot of pieces, again, within space, within passive RF. We make a lot of those pieces as well. So there's a lot of things that are happening. And so what you -- back to that 2 by 2 that we showed, sometimes it's low value for the part with high volume, sometimes it's high value for the part with high volume. And then sometimes like in semiconductor fabrication, it's high value for that part and low volume, but those parts are obviously very expensive and very -- but they are end-use parts.

So that part that was shown in the video, Brian, to Reji's point, I don't believe it was for IP reasons. It was probably the actual part, but it was very representative. And if I remember correctly, Reji, that part that they showed with the tubes, the kind of twisted tubes that went through, it was made up actually before they additively printed it of 15 parts that were actually mechanically joined together to make that assembly. So you can make them a better geometry and do it in one shot with [Technical Difficulty] [ additive ], which is a full application of that.

I guess I didn't want to get hung up on [Technical Difficulty] [ the purpose of the part in the ] video, but I just want to be clear the technology is good enough to make parts that it's going to parts that are going in the [Technical Difficulty] [ semiconductor that example ]...

Multiple parts, multiple parts in production to date. In fact, they're becoming a significant customer of ours as they're buying machinery to make parts in production. Other questions. It's a little hard to see in the light, but that's -- forgive me if I miss a name.

Paul Chung, JPMorgan. So just on the recurring theme, kind of given your broad materials portfolio, how much of that is kind of unattached to your own printers? And is that an opportunity? And then I think you also mentioned you could even look beyond additive to other industries with your materials portfolio?

So to be clear, when we develop a material, we develop it -- I'll come back to this, strong application focus requires a certain -- for example, it requires a certain polymer performance. We develop that material. We develop the process on 1 of our printers to make the parts and we bring them together for the solution. Now to the point that I think David made, that material could be used by other machine -- other hardware manufacturers. Their process parameters might be different, but it can be very equally used on other folks' machines, and we're exploring those kind of relationships today. Because obviously, we make the R&D investment, we want to get the biggest bang for doing so. So increasingly, we're looking at that business model where we would make some of our materials or maybe all of our materials available to other folks.

And then on the printer side, are you also kind of exploring maybe a subscription-type model? Is that something your customers are asking for?

Not so much. And quite honestly, they're really not asking, I don't believe, guys, correct me if I'm wrong, really not asking for...

Yes. We've had some exploration of that. For the most part, it depends on the structure the deal, there's CapEx or OpEx, depending on what they're looking for. We've looked at it, and we're investigating it right now. The demand from the commercial side is not significant. There are mechanisms by which we could do that. And so we are exploring those for if the time arises, that we see more of a demand from that from a customer. At this point, we're not seeing it, but it is available.

So just real quick with that, and I'll use Tesla as an example since they're not in our industry. There's a lot of embedded features in an intelligent vehicle or intelligent machine that can be subscription where you may actually own the equipment, but you want to have certain features available. Partnering with Oqton and our development teams, we believe that we will be able to allow more of a subscription model to features that allow for more intelligent systems and more intelligent software that will allow us to scale our business while positively impacting, right? So what we're trying to do is add value to the customer. And so those are things that we will be exploring as we develop towards this $1 billion goal. Yes, Troy.

How about a couple of questions for me now. How far are we from directly printing the aligner versus printing a mold and then vacuum casting the aligner?

I don't know if it's my place to put specific timelines on it. But we, as well as others, are working on that technology. It's a combination of both the materials and delivery vehicle. And not just for the technical feasibility, but also for the economic viability as well.

Okay. And then what materials are you guys using for the radiation oncology?

It's one of our off-the-shelf and the MJP materials that does have to buy compatibility that we need for it.

Perfect. A couple more. You didn't call out prosthetics as a vertical that you guys go after, and I always thought that, that was a very big vertical, very custom to individuals. Is that big for you guys? Is that an opportunity or...

It's an opportunity. And we participate to it, I would say, less so than some of the other areas. Where we excel is in areas that are regulated quite heavily and where our knowledge in that space together with the quality management systems and their facilities differentiates us from others, and we have, I would say, a greater level of differentiation than in prosthetics.

All right. And then last one for you. I hear a lot about point of care in the health care industry. Is that an opportunity? I'd imagine for systems and materials, but maybe a risk to the Littleton operations?

It's a great opportunity for the business. I wouldn't look at it as a risk to the traditional business. It's really something that's quite complementary. And the example that I gave earlier is, if you think about both the planning work that needs to be done as well as the manufacturing works, there's a great opportunity for us to share that work between the respective facilities. But in general, with Littleton and our European factories are meant to do is to really prove out the ability that we can manufacture at scale. We don't have ambitions to build the world's largest factory and then start supplying directly to others. It's part of an ecosystem that proves it and provides flex capacity when it's needed. But other than that, we're quite content operating, let's say, at a more modest scale.

In terms of business model, Troy, we look ahead, though, as regenerative medicine becomes a real business, we have a deep partnership with United Therapeutics for organs, for human organs, okay? In that case, we're co-developing it with them where we focus on the printing technology and the use of specific materials to print the scaffolding. When that's proven successful, their envision to be the manufacturer of lungs for per se. Other organs we're still in discussions about who's actually going to make it. But I can tell you, when it comes to non-organ applications, and we think there will be many of them, there's a high likelihood that we'll actually move from developing the application to actually making the component itself for the body and working with a channel partner to get that to market because there's just so much IP tied up in the manufacturer of those that I believe our business model will change for regenerative a bit, and we'll end up actually developing micro factories, if you will, for biologics. And I think it will be an exciting opportunity. A little more capital-intensive upfront, but the return on capital should be excellent in that type of business. So things to come, and we can't put a timeframe on that yet. But I suspect our business model, based on what we've learned in Littleton, it will change a bit for biologics. Okay. More questions?

This is John from Bank of America. Just 2 quick questions, if I may. Just looking at the 2027 financial guidance of 20% EBITDA. Just wondering how should we think about the cash flow trajectory relative to EBITDA?

Excellent question. I think, generally speaking, if you think about CapEx, our mantra is, it runs about 4% of revenues. So that's probably the only data point I can give you that will help you.

Yes. We're not a highly -- we're spending a bit more capital right now because we're still trying to consolidate footprints and things. We were a highly geographically fragmented company. We're trying to consolidate some sites and putting in a little brick-and-mortar here and there to accommodate that. By and large, though, because we assemble and sell the equipment itself and things, we're not highly capital intensive. So when you look at 20% EBITDA margins, a lot of that will turn into free cash at the end of the day.

Okay. And a quick follow-up, if I may. So you've provided a slide regarding the printer lifetime revenue going from 1x printer to 4x total. Just curious, how did that fare historically? And how is the transition or the changes have been to get to the 4x?

Well, it is -- that is -- I don't know how far back in our history we went to get that number. But that is an actual snapshot today of that profile, okay, on average. Now clearly, it varies by metals and polymers. It varies by specific market application. But if you add it all up, average it all out, that's the view today. And I expect it's been that way for some number of years. We just don't have the data to study how much, quite frankly. So sorry, John, we can't go back in time very much.

In my experience, as an owner of a machine and what I spend on, right, which is my expense is someone else's gain, right? So it's pretty consistent. These machines last typically more than a decade. Most of the time, the software is embedded when you buy a machine, the software comes with it and it's basically a perpetual license. So there's not a lot of recurring revenue historically in this industry, so I'm not talking specifically, but historically in the industry. Typically, the service cost is a percentage of the machine per year, and it's a fairly small percentage when you think about it over time. And that materials cost, in my cost and just generally speaking, as a service bureau, 20% to 30% of the cost of the part that I sell to you would be materials. And so -- and that's every -- and that's all the time, right? So you can see the materials is going to be a large part of the recurring revenue for whoever is selling that material. But so that's -- that model is pretty consistent for the industry.

So if you look, and that was a snapshot of today, an average for our company today. If you project 4, what will change on that chart is the percentage of revenue from software to recurring revenue from software. As we sell more software and we move to a recurring revenue model, a subscription-based model, that percentage will grow over time. And that's part of our gross margin game plan.

And I will say, again, generically for the industry, as we try to drive more productivity for the machine, the machine will then be able to consume more materials, which will then put downward pressure on materials costs, right? Because it will be then the one that everybody wants to focus on. So those become limiting factors as you do that. But again, the more productive you get, the cost of the machine generally goes down because that cost is spread out.

Okay. Time for 1 or 2 more, if you wish. Any other questions? Okay. So let's talk about this evening. Here's a teaser for tonight. So tonight, for those -- I'm sorry, for those online, you don't -- you won't get the benefit of the food nor the presentation, right? We're not webcasting this evening, correct? Okay. A reward for those who showed up in person here, I think it will be a marvelous center. It will be a fascinating presentation. So we've talked for some time, here's a factoid that I just found fascinating. So we've talked for some time about printing a human lung, okay? Just the concept of that blew my mind for my first year at 3D Systems. Once you spend time with it and break it down into a doubt, it's element you understand it, but it's still staggering. So here's a staggering factoid. If you look at the vasculature, okay, the blood vessels and the airways that go into a lung. The lung is the size of basically a milk carton, right? There's 4,000 kilometers, 4,000 kilometers of vasculature in a lung on average. So you say, okay, 4,000 kilometers, I have no concept with 4,000 kilometers is. You're #1 in America, we don't talk about kilometers. So that's equivalent, if you started on Venice Beach and you drive the Coney Island, that's about 4,000 kilometers in your car, 4,000 kilometers, Venice Beach California to Coney Island, New York. Nathan's hot dog, there you go as a reward. You get there. 4,000 kilometers. Now get this, though, okay, you can imagine, okay, I can drive 4,000 kilometers. Who takes a gas, $100,000 for gasoline. I can drive to Coney Island. But get this. Along the way, the car can't depart from its path by more than a diameter of a human hair, a human hair. You drive 4,000 kilometers, Venice Beach to Coney Island, and you have to stay in your lane. You can't move more than the diameter of a human hair all the way. That's printing the vasculature of a lung. That's the technical challenge. That's why 5 years ago, when Chuck Hull was approached to do this, he said that's impossible. Because bear in mind, the materials you're printing from are the consistency of Jello before it's formed, okay? It's like a thick liquid. So you're printing with something like that, and you have to print 4,000 kilometers of passages with the variation less than a human hair. That's the challenge. Four years ago, we took it on, and we progressed that technology remarkably today. What we're going to talk about tonight is some of the basics, the building blocks to that goal. But even -- and it's an incredible goal that I'm sure we'll attain someday, okay? But what's exciting is the technology that comes along with that can be applied to the rest of the human body in incredible ways in a much shorter timeframe. So we have a marvelous relationship with United Therapeutics. I have a tremendous amount of respect to their CEO and their dedication. Speed, speed, speed, they're focused on success in this effort, and I love them for it. It's great. It will bring incredible benefits to humanity. Beyond that, we will expand other organs. But beyond that, we're now -- we've been funding ourselves, applications in the rest of the human body. For the first time tonight, you're going to hear about one of the leading applications that we're going after in the rest of the body. The technical challenges are much smaller. The reason I tell you the Venice to Coney Island story is that is the brass ring. That's the gold standard. Well, silver and bronze are pretty good, okay? So there are lower requirements for the rest of the human body and certain applications, much easier to attain, much faster and very, very beneficial to the people that you attain it for in a very good business. So I'm tremendously excited about the progress we're making. There's still a lot of stuff we can't talk about, but you're going to hear more and more of it. The fact that we announced this morning the formation of a medical advisory board is it's starting to become real. We need guidance and help from folks that have managed the process from the laboratory through certification and implementation commercially because the number of applications we have are going to grow over time now. So I'm excited about it tonight. It's all that was meant to say, please come to dinner. You're going to hear about some exciting stuff. I do want to calibrate you. We're not going to be very specific on timelines. We're not going to be very specific on economics. But bear in mind, the fruits of this effort, when they happen, I believe will dwarf the rest of the company. So we're excited about it clearly. We look forward to seeing you. We're done a bit early. What time are we starting the drinks, not that anybody crosses that line. But what time, Melanie, what time are we starting drinks? 4 o'clock? Yes, 4 o'clock. Those online, that's some other time zones. So 4 o'clock, we'll have soft drinks otherwise available out here in the outer area. And then dinners right through that wall right there in the next room will be dinner and the presentation this evening. So -- oh, yeah. We have table full of parts out there. Now you've heard the presentations. Look at the parts out there, metal and polymer both. I think you'll find them fascinating. Needless to say, I think it's a great industry, okay? I think there'll be winners and losers undoubtedly. I think we're very well positioned to be a winner in this industry for reasons that we've enumerated. And I appreciate you guys making time to come and see us this afternoon. We will do this on some regular basis. I would like to get you guys to some of our sites, like Littleton, Colorado, which is where our health care centers are, that is beautiful. And I'd like to get you to some customer sites as well if you have an interest. But we'll occasionally do it in conjunction with the trade show as well. But thank you, all. For those who follow the company, thanks for your effort. I know you're very, very busy people. Thanks for your attention and your effort, and we will look forward to seeing you this evening. Okay. Thanks very much.