edited transcript of ddd earnings conference call or presentation 7-may-19 8:30pm gmt
by:Tuowei2019-09-07
Revenue from 2019 3D systems in the first quarter of May 14, 2019 ( Thomson StreetEvents)-- On Tuesday, May 7, 2019, at 8:30:00 in the afternoon, edit records of the conference call or presentation of 3D Systems Corp. earnings Executive vice president and chief financial officer, Witey Witten3D Systems Vice President of Finance, IR and financial planning and analysis Joshi3D systems- President, CEO and director of research arm Ananda Prosad BaruahLoop Capital Markets Limited Medical doctor Danny Research Department Hallum Capital Group LLC- Research Department, LLLP stock research analyst * David RyzhikSusquehanna Financial Group- Put * Hendi SusantoG. Research, LLC - Research analyst * James Andrew RicchiutiNeedham & Company, LLC, Research Department- Senior analyst * Shannon Johansen CrossCross Research Co. , Ltd-Co- Founder, principal and analyst * Troy Donavon JensenPiper Jaffray, Research Office, MD and senior research analyst at the Research Department * Wamsi MohanBofA Merrill Lynch- Director Introduction--------------------------------------------------------------------------------Operator [1]-------------------------------------------------------------------------------- Good afternoon, welcome to 3D Systems 2019 conference call and live webcast for the first quarter. ( Operator instructions) Please note that this call is being recorded. I will now hand over the meeting to your moderator, Stacey Witten, vice president of investor relations. You may begin. -------------------------------------------------------------------------------- Stacey Witten, 3D Systems- Vice President of Finance, IR and financial planning and analysis [2]-------------------------------------------------------------------------------- Good afternoon, welcome to conference call on 3D system. I am Stacey Witten, and Joshi, our President and CEO, took the call with me; John McMullen, executive vice president and chief financial officer; And chief legal officer Andrew Johnson. The webcast section of this call contains the slide presentation that we will refer to during the call. Those who wish to visit the slide section of this presentation can do so in the Investor Relations section of our website. Attendees wishing to raise issues at the end of the meeting related to the matters discussed in this conference call should use the slides and the phone numbers provided in our press release to call today. For those who have access to the streaming part of the webcast, please note that there may be a delay of a few seconds and you will not be able to post the issue over the network. The following discussion and responses to your question reflect only the views of management and will include forwarding As described on this slide. The actual results may vary a lot. More information on factors that may affect our financial results is included in today\'s press release and in our submission to the SEC, including the latest Annual Report of Form 10K. In this call, we will discuss some non- GAAP Financial indicators. In the slides that come with our press releases and webcasts, you will find out about these non- GAAP measures, including the reconciliation of these measures with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this appeal will be compared with the results of our comparable period in 2018. Now, I am happy to transfer the call to our CEO Joshi joomesh. VJ? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director3]--------------------------------------------------------------------------------Thanks, Stacey. Good afternoon, everyone. Revenue for the first quarter was $0. 152 billion, down 8% from 2018. Excluding orders from a large corporate customer from these two periods, total revenue fell by 5%. In the first quarter of 2019, we were on- Demand manufacturing due to business adjustments related to export compliance and outsourcing. In addition, demand in the European auto industry declined this quarter. In the fourth quarter of last year, we started selling our 3 new DMP products, DMP Flex 350, DMP factory 350, which includes powder management unit accessories, and DMP factory 500. In the first quarter, due to the more stringent use of the DMP Factory 350 system, we found technical problems with the powder management department, resulting in lower reliability and robustness than our standards. Therefore, we stopped the shipment of the powder management unit until the technical improvement was completed to ensure the quality and repeatability in a larger volume and for a longer period of time The customer uses the term. Due to the delivery time of metal printers, revenue for the first quarter was negatively affected by around $8 million. In addition to the problems unique to the powder management department, we have increased the metal revenueover- Our DMP printer platform is still a highly reliable high High quality 3D printer. Despite the challenges in the first quarter, sales of printer units increased by 90%, driven mainly by figures 4, SLA and DMP sales. We are pleased with the continued strong growth of printer equipment in the field of metals and plastics. Our new products are well received and we expect revenue from these products to increase throughout the year, especially later this year when we introduce additional materials for plastic printers. Gross profit margin 43. Due to the decline in revenue and production in the first quarter, 2% was negatively affected by insufficient absorption of indirect costs. We reduced our operating expenses in two years. over- Year and order. And our actions in investmentto- Market, IT, and compliance are not yet complete, and we are improving cost structures in parallel by improving productivity and efficiency and streamlining organizations in multiple areas. In the first quarter of 2019, we reportedGAAP lost $0. $09 per share, GAAP loss of $0. 22 per share. After John provides more details on quarterly performance, I will discuss our actions to improve our performance for the rest of the year, including accelerating cost reductions. But first, let me hand it over to John to discuss our 2019 issue. John? -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer4]--------------------------------------------------------------------------------Thanks, VJ. Good afternoon, everyone. In the first quarter, we reported revenue of $0. 152 billion, down 8% from 2018, including 3% of the negative impact of foreign exchange. The gross profit margin of GAAP is 43. Compared to 46 2%. The first quarter of 2018 was 9%. GAAP operating costs fell 9% to $87 million. We reported a loss of $0 for GAAP. In the first quarter of 2019, $22 per share, compared with a loss of $0. 2018 19 per share. We reported a non. GAAP lost $0. $09 or $10 per share. The first quarter of 2019 was 1 million, notGAAP lost $0. $03 or $3 per share. The first quarter of 2018 was 4 million. While we expect a detrimental impact on the timing of large enterprise customer orders throughout the year, we believe our growth momentum and opportunities will not change. We continue to expect printers, materials, healthcare and software to power the long-term development. term growth. Printer sales rose 90% in the first quarter. But thanks to a mix of unit sales prices, printer revenues fell by 29% to $28 million, largely determined by the order time of large enterprise customers. Printer unit sales, revenue mix and overall average selling prices may continue to fluctuate, especially when we increase sales of new products at multiple prices ranging from $5,000 to $1 million. Material revenue fell 3% to $41. First quarter 4 million. The delay time between printer unit sales and scaling material utilization is typically 2 to 3 quarters. As we discussed last quarter, we are also experiencing a decline in legacy materials, faster than materials related to core and new systems. We are confident that these trends will begin this year and we continue to expect material growth rates to increase in the second half of 2019. There has been an increase in health care services and simulated revenue, but the impact of big customer order time has offset these increases, with total health care revenue down 5% to $50 million. Excluding the annual orders from large corporate customers, health care revenue has grown by about 18%. We continue to be pleased with the overall demand trend for healthcare, including our next dent 5100 3D printer. Software revenue fell 8% to $20. 8 million in the first quarter was mainly due to a decline in Cimatron product revenue. Although quarterly performance may fluctuate, we are still looking forward to long-term software growth -- Actions taken to increase software growth and enhance our software portfolio. On- Demand services revenue fell 12% to $22. 6 million this quarter. We expect headwinds in the second quarter related to business adjustments --- Related to export compliance and outsourcing. In the first quarter, we encountered additional weaknesses in our automotive customers in Europe. We report a gross profit margin of 43. In the first quarter of 2019, 2% was reduced by 370 basis points due to the absorption of supply chain overhead costs related to the decline in revenue and production in the current quarter, as well as the impact of the sales mix between categories. Non- Gross margin of 2019 in the first quarter was 44. Compared to 47, 2%. 1% last year. We continue to drive supply chain optimization, manufacturing efficiency and process improvement, but we expect the medium-term gross profit margin to decline as inventory reduction actions and production facilities decrease The rest of this year is in his 40 s. GAAP operating costs for the quarter were $87 million, down 9% from 2018, with SG & a costs down 6% and R & D costs down 15%. Non- GAAP operating costs for the first quarter were $72. 9 million, down 8% from the first quarter of the previous year, down 4% in a row. Compared with the 2018 quarter Gaap sg & A costs fell by 5% to $51 million, reduced compensation costs, bad debts, commissions and construction costs were partially offset by higher legal costs. Non- Gaap r & D costs fell 15% to $21. 9 million as we focus on material and software development this year, the cost of compensation for R & D materials is low. We believe that we have gone beyond the significant investment phase needed to start turning the company around and that our focus this year is on reducing costs and improving profitability. We used $15. Operating cash for the first quarter was 2 million. We ended the quarter at $157. 3 million of unlimited cash on hand. The use of cash for this quarter is affected by the following factorsthan- Expected results and higher inventory. While the use and generation of cash will continue to fluctuate in different periods, we expect to generate organic free cash flow in 2019, because we have significantly reduced our inventory at the end of the year compared to the previous year, and reduced capital expenditure. With this I will transfer the phone back to VJ. VJ? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director5]--------------------------------------------------------------------------------Thanks, John. We focus on improving the cost structure and continue to improve the organization and operations to drive profitable growth. We have taken action to drive the cost of the previous plan and will take more steps to reduce the total cost of 2019 in the coming quarters from $10 million to $15 million above the original plan for this year. We will withdraw from the entertainment business of 2019 in the first quarter, which will reduce our income by about $12 million this year, but will improve our overall profitability. We are moving to two major businesses within the company: one business that includes plastic and metal hardware and materials and on-Demand Service; The second is software and medical workflow solutions. We believe that this improvement in our business structure provides synergies within each group, enabling us to make better use of resources. With this, the metal will develop under the leadership of Phil Schulz, and healthcare will drive Radhika Krishnan, which enables us to streamline leadership teams and organizations, reduce costs and make In addition to more aggressive cost action, we also hope to continue to increase sales of new platforms and seek sustained growth in the overall unit and an increase in market share. Due to unit sales last year, we expect material growth to improve in the second half of 2019, and we plan to launch new plastic materials this year, which we believe will help drive economic growth later this year, 2020. We expect to continue to increase sales of DMP printers this year and make technical improvements to powder management. Last month, we were on-Demand service. The portal is standardized and exported automatically- Related processes, we believe that these processes help us inDemand service. With the combination of software and healthcare, we believe we are further expanding the opportunities for our workflow solutions to accelerate growth. With the breadth and strength of our portfolio, we continue to have great market opportunities, and we continue to work to implement our strategy and drive for the long term Long-term profit growth. With this I want to turn the phone back to Stacey, who will open the floor for questions. Stacey? -------------------------------------------------------------------------------- Stacey Witten, 3D Systems- Vice President of Finance, IR and financial planning and analysis [6]--------------------------------------------------------------------------------Thanks, VJ. We begin to answer questions now. ( Operator instructions) As a reminder, please point all questions to the conference call section of this call. The phone number is provided again on the slide. If you call within the United StatesS. The number is 1 (877)407-8291. If you call outside the USS. The number is (201)689-8345. Questions and Answers--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------( Operator instructions) Our first question today is from Ananda Baruah at Loop Capital. -------------------------------------------------------------------------------- Research Department Loop Capital Markets LLC Ananda Prosad Baruah-MD [2]-------------------------------------------------------------------------------- Yes, if you can, it\'s two. So just clarify the revenue dynamics, guys. You said the softness of the car would slow down. VJ, you also quoted the order time of large enterprise customers several times. Then there is a dynamic ranking of the powder management of the metal. So it sounds like some--so just -- Here is the timing of the orders that I am trying to follow, does that mean that these orders will come back, which you think is less secular or structural? Is this different from the softness of the car? So if you can step on these? So what do we think about powder management in this regard? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director3]--------------------------------------------------------------------------------Yes. So I think -- Yes, corporate customers are not a secular thing. It\'s about how they build factories to really support growth. The customer business is doing very well. My point is, basically, the order- How they will enter this quarter will be different from the way they build their factories. Now, we do see that it is still a headwind for 2019 people, but it is not a secular problem. This is a technical problem in terms of metals. We understand the core causes of technical issues, we are working on several solutions and we will be able to actually ship. Because my point is that quality, reliability is our top priority and I don\'t want to ship until we meet the quality and reliability standards. -------------------------------------------------------------------------------- Research Department Loop Capital Markets LLC Ananda Prosad Baruah-MD [4]-------------------------------------------------------------------------------- Do you know when it will be corrected? What do you want us to think? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director5]-------------------------------------------------------------------------------- I think we should consider this in the second half because I want to make sure we test our solution and we will be able to introduce it in the second half. -------------------------------------------------------------------------------- Research Department Loop Capital Markets LLC Ananda Prosad Baruah-MD [6]--------------------------------------------------------------------------------Okay. Got it. Then, as a quick follow-upup. John, what should we look at the level of operating expenses now? Considering that you are accelerating some cost action? -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer7]-------------------------------------------------------------------------------- Yes, I think from the first quarter to the second, I think a little bit of the linear rise is driven by our plan for the second quarter, but also because of the annual salary increase we launched at the beginning of the second quarter. So maybe there\'s going to be an increase, but for the rest of the year, as we continue to cut costs across multiple dimensions, it\'s going to be pretty flat overall. --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director8]-------------------------------------------------------------------------------- I think it is important to understand that we are now trying to really organize the company with the right business model, which will also be a driver of cost reduction. This is very important for the company. I think we are a great platform. We will start to see material growth in the second half of the year. We need to study the cost structure now. --------------------------------------------------------------------------------Operator [9]-------------------------------------------------------------------------------- The next question comes from Hendi Susanto of G. Research. -------------------------------------------------------------------------------- G. Hendy SusantoResearch, LLC - Research analyst [10]-------------------------------------------------------------------------------- John, you mentioned that the gross margin will be in the medium term. The balance for the whole year was 40%. Could you please share your assumptions about gross margin for products, materials and services? I would like to know if the weakness in gross margin is related to the printer gross margin as we expect growth to recover in the second half of 2019? -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer11]--------------------------------------------------------------------------------Yes. The decline in profit margins in the first quarter has really driven --- On the hardware side of the business, we-- When we talk about it in prepared materials, we do have absorption problems in our own internal factory because of the mix of business and where production is not. When we look forward to our future forecasts, we say the basis of mid About the rest of the year, people in their 40 s think we will still see some of this in our internal factory. In the first quarter, the gross profit margin of raw materials was 70%. So, as VJ talked about with growth in the second half of the year, this bodes well for material profits. But we will stick to it. In our 40 s until we see something different. --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director12]-------------------------------------------------------------------------------- I think what we\'re doing here is a balanced game because we want to cut inventory significantly. When you do this, you are managing the production of our products, which is the use we want to make. Because we want to make sure our inventory is down and really start creating cash for the company, it\'s a balanced game. Because you know what you have to do is really reduce production and utilization is also important. That\'s why we\'re trying to get the company into the right place from the portfolio, which is the right inventory we can manage. Again, the profit margin is 70%, and then the material to achieve growth in the second half will enable us to really manage this shift I am talking about. -------------------------------------------------------------------------------- G. Hendy SusantoResearch, LLC - Research analyst [13]-------------------------------------------------------------------------------- Second question, how should we look at the trend of ASP and product mix? Like, you have a very high one-of-a-kind- But printer revenues are still falling. I would like to know if there are some product combinations for mixing and mixing. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director14]-------------------------------------------------------------------------------- Yes, there are two things here. First, when you have the corporate customers we are talking about, the price points for these devices and metals are very different compared to the income of our dental equipment, and-- The unit growth of 90%, many of which are Figure 4 and the low end of the market, such as MJPs. However, the ASP number will be very different when you have metal, enterprise customers and SLA products. So I think we need to get things sorted out. And then, as John always said- Because our products range from $5,000 to $1 million. It\'s hard to say where ASP will land. But we can say with confidence that we will see- Continue to see unit growth, which means we have gained a share in the market --- Market share per unit. --------------------------------------------------------------------------------Operator [15]-------------------------------------------------------------------------------- The next question comes from David Ryzhik of Susquehanna Financial Group. -------------------------------------------------------------------------------- David Ryzhik, henna consortium, LLLP, research,Associate [16]-------------------------------------------------------------------------------- So I just want to clarify that the timing of the metal printer shipment is $8 million, which has nothing to do with corporate customers. I believe in relation to corporate customers, you have not really provided any estimates as to whether or not these orders will come back? For the rest of the metal printers, should we assume that the delivery time for the second quarter is $8 million? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director17]--------------------------------------------------------------------------------No. So there -- Let me answer two questions. You\'re right. The $8 million metal printer has nothing to do with corporate customers. The corporate customers we talk about are plastic customers, so this is the first thing. As far as the metal problem is solved, it will not happen in the second quarter. This is indeed something we will continue to see in the second quarter. Then in the second half we will be able to post what I said about the technical issues. Then, in terms of any seasonality of the enterprise customer order model, they are all ordering units. Just when you are building a factory, you will order more equipment in a certain quarter, while in a certain quarter you will not order more equipment. So I think that\'s the real headwind we have. That\'s not to say that they didn\'t order, just depending on how they built the factory, their model would be different. -------------------------------------------------------------------------------- David Ryzhik, henna consortium, LLLP, research,Associate [18]--------------------------------------------------------------------------------Understood. Then, can you provide some insight into some of the lower material utilizationpriced units? SPro and Figure 4. The price is 20% to 30% per year? Or any way we can think about it. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director19]--------------------------------------------------------------------------------No, we\'re not-- Yes, we don\'t. But let me be very specific. We are involved in the industrial sector, not in the consumer sector. This is a very important difference. Second, these products- For example, dental, I can talk about dental specifically. Dental Products in figure 4 are of great use and I will not give you the exact number but there --- We can build annuities on materials. - Obviously, we can build a very profitable business on the basis of the dental material annuity. Again, we absolutely believe in the second time- The second half means the second half. - That said, in the third and fourth quarters of 2019 and 20, you will see positive material growth. My reasoning is very consistent. --------------------------------------------------------------------------------Operator [20]-------------------------------------------------------------------------------- The next question comes from Wamsi Mohan of Bank of America Merrill Lynch. -------------------------------------------------------------------------------- Wamsi Mohan, Merrill Lynch Research Department-Director [21]-------------------------------------------------------------------------------- So you have made several comments on how you expect a pick-up in material growth in the second half of the year. Can you tell us your material income? How many of them are related to the old base of decline and growth? Because you seem confident that the crossover will happen here soon? Can you give us some feelings about how dependent it is Printer sales? Could it also be the extent of the decline, or even a rough percentage, compared to the growth area and scale? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director22]--------------------------------------------------------------------------------Yes. So I can\'t give you the percentage, but let me give you basically what we think about material growth. We have traditional printers, they are old printers, and usage has basically declined due to the use of competitive materials, or some of them have been retired, or some of them have been replaced. This heritage has remained a large part of it for many years and is declining. New printers, the growth we see is consistent with our usage assumptions. What I\'m talking about is Figure 4, our 6100, our dental equipment. These core businesses of our SLA machines, our SLS machines, our MJP machines are also growing. So when our core and new materials offset our traditional recession, that\'s why we believe we will see positive material growth in the second half of 2019. -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer23]-------------------------------------------------------------------------------- I think Wamsi, we talked about this in the last quarter. - We have built very good analysis models over the past year to track and update. So it\'s -- We have good predictability here. -------------------------------------------------------------------------------- Wamsi Mohan, Merrill Lynch Research Department-Director [24]--------------------------------------------------------------------------------Okay. Then think about the industry you\'re pulling out of, the entertainment industry. I think you\'re talking about $12 million. Is this for this year or the whole size? There will even be some, some sort of, exit hit-- Will you go next year? Or how long do you think this exit will happen? Can you tell us some of the profitability, such as the impact of gross margin and earnings per share on exit? -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer25]--------------------------------------------------------------------------------Yes. For -- We already pulled it. -for non- The purpose of GAAP is that we have extracted this from the number of valid q1. So we \'ve made that decision, and what I see is an estimate of annual revenue, which I think is $12 million in the prepared material. This is a kind of scale. We don\'t specifically mention profitability, but, the nature of leaving there and our ability to focus on more sensible things, we believe that over time, this will affect the profitability of the company. --------------------------------------------------------------------------------Operator [26]-------------------------------------------------------------------------------- The next question is Jim Ricchiuti from Needham & Company. -------------------------------------------------------------------------------- Needham & Company, LLC, Research Department- Senior analyst27]-------------------------------------------------------------------------------- Like a follower. up. I may have missed it, but did you describe the areas in which this $12 million revenue came from? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director28]-------------------------------------------------------------------------------- Well, this is a business that we work with the studio. We need digital technology. - I think that\'s what we\'re talking about. -------------------------------------------------------------------------------- Needham & Company, LLC, Research Department- Senior analyst29]--------------------------------------------------------------------------------Got it. This makes sense. I missed it, VJ. About the health care business. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director30]-------------------------------------------------------------------------------- Mainly service business. Mainly service business. Yes, please continue. -------------------------------------------------------------------------------- Needham & Company, LLC, Research Department- Senior analyst31]--------------------------------------------------------------------------------No. that\'s helpful. I am interested in this corporate healthcare client, at least from your description you have enough visibility- Enter the business and enter the order mode to indicate that it may be-- For the rest of 19 years, it may continue to be weak. Is this a fair description? While there are still orders, they may not have ordered at the level you originally expected? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director32]--------------------------------------------------------------------------------No. What we have to say is that the order model is very different. Some quarters, such as the first quarter of last year, have large orders. We have fewer orders this quarter. So I think that\'s what I\'m talking about. But overall, they continue to grow. They did a very good job in the market. It\'s just the way they order machines, depending on how they want to build factories when they open them, so they become part of the entire production line. There will be no ups and downs in these things. Not necessarily clean here. I think that\'s what we\'re trying to make sure, and that\'s what we started talking about earlier, because we want to make sure you all understand that this could have a significant impact on our printer hardware, revenue growth, we just want to make sure you can do that. This will continue in the second quarter, and some of them will continue in the third and fourth quarters. That is to say, the number of products they order will vary. I think that\'s what we have to explain. -------------------------------------------------------------------------------- Needham & Company, LLC, Research Department- Senior analyst33]--------------------------------------------------------------------------------Okay. Was it your --I think so. I just wanted to sound like this customer in terms of the overall health care business, and your growth is very good. Do you expect the health care industry to even have these- This instability with this customer will grow this year? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director34]--------------------------------------------------------------------------------Yes, yes. We will continue to develop the healthcare business if you take it out. The healthcare business has been growing over the years and we will continue to grow this business very, very much- We did a very good job in the health care business. However, because of this corporate customer, we see this direction, which is basically irrelevant to the customer\'s business. This is just their order mode. --------------------------------------------------------------------------------Operator [35]-------------------------------------------------------------------------------- The next question comes from Troy Yansen of Piper Jaffry. -------------------------------------------------------------------------------- Troy Donavon Jensen Piper Jaffray, Research Department, Senior Research Analyst36]-------------------------------------------------------------------------------- So, if you go back to the powder management issue, is this platform only working on the 500 series? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director37]--------------------------------------------------------------------------------No. They work on powder management for 350 and 500. It\'s just -- For powder management issues, you can purchase a unit with 350 or 500. But the problem is the integration of 350 and powder management because the powder management approach on 500 is very powerful. -------------------------------------------------------------------------------- Troy Donavon Jensen Piper Jaffray, Research Department, Senior Research Analyst38]--------------------------------------------------------------------------------Okay. Can you talk about the percentage of powder management or piping attached to metal sales? It\'s. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director39]-------------------------------------------------------------------------------- Troy, it\'s just a new product. This is a new product. So -- This is a new product. To be frank, we want to make sure we do a thorough test and we want to make sure we do the right way-before we ship. In the first quarter, our metals were 350 and 500 of what we called the factory. 500 there is more about representation. We want to identify our features for our customers. But I just want to make sure that you hear that our core issue is indeed in the powder management department at the 350 plant and that\'s what we\'re working on. -------------------------------------------------------------------------------- Troy Donavon Jensen Piper Jaffray, Research Department, Senior Research Analyst40]-------------------------------------------------------------------------------- So I guess what I\'m asking is, if you look forward to the pipe, how many percentage of powder management in your metal opportunity is attached to the pipe? Should we assume that there is little or no metal revenue until this issue is resolved, or if people will still buy the platform. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director41]--------------------------------------------------------------------------------No, no, no. Let\'s be clear about this. First of all, 350 platform, 350 Flex is doing very well. Our income is growing year by year. over- 350 kinds of year. So I just want to make sure that our metal business is actually doing very well, in addition to the 350 powder management unit shipment I mentioned. So it is very important to understand this. So our metal business is growing every year. over-year. What we expect is that we will be able to ship other metal parts, which is what I am talking about with the $8 million issue. -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer42]-------------------------------------------------------------------------------- So far we have seen good early demand, Troy. But that\'s what we have between 500 orders. How do we describe this $8 million. --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director43]-------------------------------------------------------------------------------- Overall, I think our metal business is doing very well. Our annual revenue in the metal business is growing. over-year. We received orders for these devices due to technical problems and could not ship them. -------------------------------------------------------------------------------- Troy Donavon Jensen Piper Jaffray, Research Department, Senior Research Analyst44]-------------------------------------------------------------------------------- Okay, okay. And VJ, only one follow-upup for you. Figure 4 update, have you shipped all 4 platforms now? Or a couple coming soon? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director45]-------------------------------------------------------------------------------- No, what we haven\'t shipped yet is modular and will start shipping on June. -------------------------------------------------------------------------------- Troy Donavon Jensen Piper Jaffray, Research Department, Senior Research Analyst46]-------------------------------------------------------------------------------- This is a higher goal. That\'s big, right? Baked by a robot? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director47]-------------------------------------------------------------------------------- No, it\'s not big. it\'s ours. . . -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer48]-------------------------------------------------------------------------------- It\'s in the middle. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director49]--------------------------------------------------------------------------------The middle. . . -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer50]-------------------------------------------------------------------------------- But we can actually ship. --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director51]-------------------------------------------------------------------------------- We have shipped the product. --------------------------------------------------------------------------------Operator [52]-------------------------------------------------------------------------------- The next question comes from the Shannon Cross of Cross-study. -------------------------------------------------------------------------------- Shannon Seisen cross Research Co. , Ltd. Co- [Founder, principal and analyst]53]-------------------------------------------------------------------------------- So there are only a few questions. Just don\'t make the material like that. But when we consider the usage of each device on a similar devicefor- Just like basis, when we consider pricing, the same is true if there is any pressure in the aftermarket. I just want to know more about some of the dynamics behind supply or material revenue, especially? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director54]-------------------------------------------------------------------------------- As a result, usage varies depending on the category and price. Okay. This is the first thing I want to make sure everyone understands. Another important thing I will say is that we are only involved in the industrial field. That means more- Every printer we ship has a lot of use so we can enjoy the annuity stream. This is the second point I want to say. Because we have our own proprietary materials, we have confidence in the market share of our materials. Now, in some cases, we see competition, in particular, we see competition for MJP wax products, especially in China and some of the old legacy materials that I talked about, this is where we see competition. -------------------------------------------------------------------------------- Shannon Seisen cross Research Co. , Ltd. Co- [Founder, principal and analyst]55]-------------------------------------------------------------------------------- Is it manifesting? - I mean, do you have to cut the price? Or are you just not willing to go there, so you will lose some player share over time? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director56]-------------------------------------------------------------------------------- We did adjust some prices in some cases, but we are now- We look at it from a system point of view, because we need to make sure that our hardware price and material price. But this is the way we have to do it. But in -- Overall, we don\'t see competition from third place. Party materials. -------------------------------------------------------------------------------- Shannon Seisen cross Research Co. , Ltd. Co- [Founder, principal and analyst]57]--------------------------------------------------------------------------------Okay. And then I did. . . --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director58]-------------------------------------------------------------------------------- I gave two concrete examples of what we see in competition. -------------------------------------------------------------------------------- Shannon Seisen cross Research Co. , Ltd. Co- [Founder, principal and analyst]59]--------------------------------------------------------------------------------Okay. Then I got it. leave Hollywood, the real core industry. I\'m curious if you\'re still thinking of stripping off other businesses, perhaps as part of a cost reduction, or just separate from this? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director60]-------------------------------------------------------------------------------- So I think what we\'re doing is our portfolio. I want to make sure that the first thing I want to do is turn the company around and figure out where we want to take the company. I mentioned now that I see two business models, hardware, printers, materials and online Requirement business, then based on workflow- The production workflow stage of software healthcare. These will be our two key pillars, and I want to organize around that, and I want to really look at our business and make sure which ones are aligned and which ones are not. We will make this decision. I think it\'s important to really focus on the company right now, we have a good platform, we are putting our materials in the right place, our export compliance, we are working on this, we offer ODM business now. What we need to do is plant our materials and take the cost out. So I think that\'s what we want to do. -------------------------------------------------------------------------------- Shannon Seisen cross Research Co. , Ltd. Co- [Founder, principal and analyst]61]--------------------------------------------------------------------------------Okay. Finally, as far as Figure 4 is concerned, I\'m curious to see who will buy it if you have a lot of repeat customers in some vertical areas? Can you give me some more color? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director62]-------------------------------------------------------------------------------- Therefore, the first part of Figure 4 is dentistry. Our dental business is doing very well. We are entering the dental laboratory and now we are globalization. So my point is, if we\'re going to see the dental business, Figure 4, grow-- Growth continued in 2019. The growth of materials is also very important for our material business. The second part of what we really focus on, Figure 4 is what I call the design validation market where we can --- Enterprise customers will buy in their R & D labs to really evaluate editorial manufacturing technology. As we develop new materials, we will continue to infiltrate this technology into other areas. But I think it\'s a real substance development game in my opinion. We have a very strong platform and all we need to do is provide more materials. --------------------------------------------------------------------------------Operator [63]-------------------------------------------------------------------------------- The next question comes from Craig\'s Greg Pam. Harlem Capital Group-------------------------------------------------------------------------------- Craig-Danny egridge Research Department Hallum Capital Group LLC- Stock research analyst64]-------------------------------------------------------------------------------- It\'s actually Danny egridge who joined Greg palms today. I know you mentioned that your material Gross margin is around 70% this quarter. As you mentioned, when we show up in the second half of the year, you expect the new acceleration to cross with the declining heritage more quickly, how do you want us to look at the gross margin of this part of the material? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director65]-------------------------------------------------------------------------------- We should keep the gross margin at 70%. -------------------------------------------------------------------------------- Craig-Danny egridge Research Department Hallum Capital Group LLC- Stock research analyst66]--------------------------------------------------------------------------------Okay. Then I think, looking forward to the second half of the year, just in the demand area, where do you want to see the strength and possible weaknesses of demand? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director67]-------------------------------------------------------------------------------- Well, I think the metal is very strong if you look at our overall portfolio. I think there will continue to be demand. Our SLA platform is very, very- In the world of my thoughts We will continue to see the SLA in class. Our dental business is very, very strong. We will continue to drive growth in the dental business. Next will be figure 4 using new materials. I feel very good about it. We will continue to grow our wax. Based on MJP printer. The last one is our 6100 SLS machine. --------------------------------------------------------------------------------Operator [68]-------------------------------------------------------------------------------- The next question comes from Ananda Baruah at Loop Capital. --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director69]-------------------------------------------------------------------------------- The second question. Okay. -------------------------------------------------------------------------------- Research Department Loop Capital Markets LLC Ananda Prosad Baruah-MD [70]-------------------------------------------------------------------------------- Why not follow up? up in there. VJ, just, listen to the other comments on the phone, you-- I think you said last quarter that you think the overall business will grow this year. You think there are two problems. - Do you still think it\'s possible? The second question, if the answer is No. Once, to some extent, to normalize these projects that you are talking to, to some extent, to exit the business tonight, and then to discuss powder management issues with other businesses, do you expect it to grow year by year? over-year? --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director71]-------------------------------------------------------------------------------- I think my point is that in the second half of the year we should be able to grow the business and I think by then our ODM business will start to grow. If you look at the business, it\'s down this year. over- Our export compliance portal achieved this in the first quarter. Hopefully, we will be able to grow this business in a few quarters. We will address our metal technology issues, we will develop this business and the dental business is already growing, as I said, our SLA business is very strong and the SLS business is very strong. So I hope that as long as we address these issues, we can achieve growth in the second half of 2019. --------------------------------------------------------------------------------Operator [72]--------------------------------------------------------------------------------( Operator instructions) Our next question is from Hendi Susanto of G. Research. --------------------------------------------------------------------------------Vyomesh I. 3D Systems company Joshi- President, CEO and director73]-------------------------------------------------------------------------------- Yes, the second question. Go ahead. -------------------------------------------------------------------------------- G. Hendy SusantoResearch, LLC - Research analyst [74]-------------------------------------------------------------------------------- The third time is charm. John, what is the cost for the higher goal of reducing costs? How much should we save compared to reinvestment? -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer75]-------------------------------------------------------------------------------- Yes, I think in the comments prepared by VJs, he talked about $10 million to $15 million throughout the course of the year, beyond our plans. So what we expect is- Most of them will be used for operating expenses, but some of them will be used for the cost of selling goods, and most of the cuts will be-- We strive to improve the performance of P & L. We will not invest a large part of these cost reduction plans, and certainly not this year. -------------------------------------------------------------------------------- G. Hendy SusantoResearch, LLC - Research analyst [76]-------------------------------------------------------------------------------- So, what will be the additional cost of restructuring $10 million to $15 million in total cost savings over 2019 years? -------------------------------------------------------------------------------- John Nicholas McMullen from 3D Systems Executive Vice President and Chief Financial Officer77]--------------------------------------------------------------------------------Yes. I don\'t think we- We don\'t have specific numbers, but when we take action in this consumer population -- Related costs, we show the cost in GAAP to non- Settlement of accepted accounting principles. So if you look at the accepted accounting principles as non- For example, GAAP reconciliation, you will understand the impact of this quarter. We provide this information every quarter. --------------------------------------------------------------------------------Operator [78]-------------------------------------------------------------------------------- There are no further problems. I will now transfer this call to Stacey Witten and ask him to conclude. -------------------------------------------------------------------------------- Stacey Witten, 3D Systems- Vice President of Finance, IR and financial planning and analysis [79]-------------------------------------------------------------------------------- Thank you for joining us today and for your continued support for the 3D system. The replay of this webcast will be broadcast on the Investor Relations section of our website www. 3dsystems. com/investor. Thank you. --------------------------------------------------------------------------------Operator [80]-------------------------------------------------------------------------------- This concludes today\'s meeting. At this point, you may disconnect the line. Thank you for your participation.