3D Systems Corporation 2026 Q2 Earnings Call

Welcome to 3D Systems second quarter 2026 earnings conference call. With me on today's call are Dr. Jeffrey Graves, President and CEO, and Phyllis Nordstrom, Chief Financial Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the investor relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. With that, I'll turn the call over to our President and CEO, Dr. Jeffrey Graves, for opening remarks.

Thank you, Monica. Good morning, everyone. Today's call is accompanied by two important announcements: our earnings results and the beginning of a leadership transition plan, both of which I will address this morning. I will begin by reviewing a few important highlights from our second quarter and first half, as well as provide updates on several of our key market focus areas. After that, I'll address this morning's leadership announcement. I'll then turn the call over to Phyllis Nordstrom, our CFO, who will summarize the quarter's financial results and outlook, and will then open the call up for Q&A. With that, let's turn to slide five. A major theme clearly emerging this year is the return of capital spending by our customers in key markets. The timing is excellent, given the intense focus we've placed on refreshing our product portfolio over the last three years.

In the second quarter, printer sales increased by more than 45%, led by our best-selling DMP 350 metal printing system, our new SLA 825 flagship polymer platform, and our MultiJet printing systems that form the cornerstone of our new denture product line. I'll comment on each of these in the context of their market drivers in a few moments. From a business unit standpoint, our healthcare business once again delivered solid growth and remained the company's largest segment, driven in particular by strong demand for new printing systems in both med tech and dental markets. Industrial business revenue was modestly lower year-over-year as older systems in our installed base are now being increasingly replaced by our new printer platforms. Despite this dynamic, our two key industrial focus markets, aerospace and defense and data center infrastructure, both delivered strong double-digit growth again this quarter.

I'll share a few highlights on those markets momentarily. Moving to slide six. Our newest generation of 3D printers offer levels of precision, economics, and robustness that were only dreamed of a few years ago. These advancements are now proving essential to the widespread adoption of 3D printing in key production environments. One of the clearest trends is the accelerating use of 3D printing in metal component manufacturing. As we've discussed on previous calls, there are two equally important paths to producing metal parts. Direct metal printing using laser powder bed fusion and metal castings that rely on 3D-printed patterns as a critical step in the manufacturing process. To address each path, we've launched two important systems. Our DMP 350 triple laser direct metal printer and our SLA 825 dual laser polymer printing system designed for high-quality metal casting patterns.

Sales of both platforms into our key markets have been very strong, with second quarter growth of roughly 90% and 125% respectively year-over-year. Given this rapid rise in demand for 3D-printed metal parts, we're also significantly expanding our internal metal parts production capacity. This is an important element of our growth strategy, and I'll touch on it in more detail in a few moments. The third breakthrough product we have brought into the market is the NextDent 300, purpose-built for the production of dentures. This platform is being very well received because of its precision and economics, enabling dental professionals to deliver a high-quality, durable product that improves the patient experience while increasing the productivity of their practices. These technologies will continue to enable our success in key markets for years to come. On to slide seven. As proud as I am of our refreshed product portfolio, it would mean very little if we did not target these systems effectively at markets moving most decisively toward the adoption of additive manufacturing technologies.

Four markets fit this profile very clearly. Med tech, dental, aerospace and defense, and data center infrastructure. Two of these sit in our healthcare business and two in our industrial business. Customers in these markets derive exceptional value from 3D printing, from enhanced design flexibility that improves both performance and cost to reduce supply chain risk in an increasingly volatile world. With limited time on each quarterly call, I'll focus on a few key use cases that I hope will capture the excitement and momentum these four markets provide. Moving to slide eight, I'll start with aerospace and defense, with a specific focus this quarter on space applications.

As everyone is aware, there's been a resurgence of interest in space access, with applications ranging from new satellite constellations for communications to large-scale orbital data centers and even interplanetary travel. These visions are all enabled by the remarkable advancements achieved in reusable launch vehicles. These enormous rockets have already reduced the cost of access to space by an order of magnitude, and the next generation of fully reusable vehicles is positioned to drive costs down even further, making these large-scale applications in space far more economically viable. The impact of this breakthrough in rocketry is clearly visible in launch cadence. A rocket to space is now launched roughly every two to two and a half days. In short, what used to be a yearly total for the entire global industry is now being achieved by a single company in a matter of weeks.

This acceleration is expected to continue as reusability improves and costs decline further. A critical enabler of this progress has been the development of advanced rocket engines designed for high flight rates. These engines use a sophisticated combustion architecture that improves efficiency and durability while reducing maintenance between flights. Additive manufacturing has been integral to this evolution, both through direct metal printing of complex geometries and even more so through high-precision investment castings made from 3D-printed patterns. Our SLA825 dual laser system, launched late last year, is specifically targeted at these advanced casting applications. As evidence of its early success, in the second quarter, we received one of the largest industrial printer orders in our company's history, driven by demand for casting patterns used in next-generation reusable rocket engines.

Production of these engines is expected to grow by nearly an order of magnitude over the next decade as launch cadence continues to accelerate. These capabilities are helping make fully reusable heavy lift vehicles more practical and are contributing to a sharp reduction in the cost of access to space. Moving to slide nine, let's turn to the healthcare business with an update on our dental market. Of the four dental markets, straighten, protect, repair, and replace, 3D printing has already proven its value at scale in tooth straightening. Building on that foundation, the next large growth opportunity is converting the historically labor-intensive replace market for dentures into a fully digital 3D-printed monolithic denture product, an objective we have been intensely pursuing for the last three years.

With more than 30 million denture wearers in the U.S. and nearly four million new dentures sold each year and comparable numbers in Europe, the end market opportunity is measured in the billions of dollars. Based on these estimates, the corresponding revenue potential for our company exceeds $150 million annually in the U.S. in printers and consumables sold to the dental labs that produce dentures with a similar exciting opportunity in Europe. We launched our NextDent 300 denture printing system in late 2025 following FDA clearance and secured full EU MDR approval for sale into Europe in the second quarter of this year. Since that time, acceptance by dentists has been strong, driven by the beauty of the product, its durability, and the comfort patients experience from the first fitting.

These clinical benefits create demand, while the efficiency of the digital production process and shorter lead times translate that demand from dental labs into revenue for 3D Systems. The result has been a rapid rise in demand each quarter since launch, as shown in the production chart on slide nine. While the market's highly fragmented with more than 8,000 labs across these regions, revenue is concentrated in the top 300-400 manufacturers. Based on our current outlook, we expect to have printers installed in more than 100 of these dental labs by year-end, with a growing number of multi-unit deployments to follow. Importantly, once operational, even these initial printers alone will generate a recurring revenue stream of more than $2 million annually at highly accretive gross margins.

While encouraging, these sales represent less than 2% penetration of the overall denture market in the U.S. and Europe, meaning the future growth potential is very strong. As an example of customer receptiveness to this technology, one of our earliest lab customers purchased their first printer late last year and has already installed and is running a sixth unit, tripling their historic capacity. We now see others following suit. For early adopters, this creates a clear path to market share gains through lower production costs and faster turnaround times. Looking ahead, with regulatory approvals expected in Mexico, South America, and several Asian countries over the next year, combined with the strong acceptance rates we're seeing in the U.S. and Europe, we expect our denture-related revenue to become one of the largest and most profitable streams for the company in the years ahead.