3D Systems Corporation

Good morning, and welcome to 3D Systems Conference Call and Audio Webcast to discuss the results of the first quarter of 2022. My name is Kevin, and I'll facilitate the audio portion of today's interactive broadcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Melanie Solomon, Investor Relations. Please go ahead.

Thank you, Kevin. Good morning, and welcome to 3D Systems Conference Call. With me on the call are Dr. Jeffrey Graves, our President and Chief Executive Officer, Jack Tarnarula, Executive Vice President and Chief Financial Officer, and Andrew Johnson, Executive Vice President and Chief Legal 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 in the Investor Relations section of our website. For those who have accessed the streaming portion of the webcast, please be aware that there may be a few seconds delay and that you will not be able to post questions via the web. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in last night's press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, which are both available on our Investor Relations website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call would be against our results for the comparable period of 2021. Now I'm pleased to turn the call over to Jeff Graves, our CEO. Jeff.

Thanks, Melanie. And good morning, everyone. As you all know, the beginning of 2022 has already thrown significant challenges at the entire market, no matter what portion of the economy you serve. Whether it be continued supply chain pressures, significant rise in the rate of inflation, the ongoing impact of the pandemic or the tragic circumstances that we've seen unfold with the Russian invasion of Ukraine. The operating environment has been difficult and largely unpredictable. With that said, I'm very proud of how our 3D Systems team has continued to stay focused and executing well for our customers throughout this period. Ironically, in the longer term, these same factors that make our life more difficult today are increasing our opportunities for growth in the future. as our customers continue to reevaluate their critical supply chain strategy and increasingly consider additive manufacturing as a key element in the production strategy of the future. As we've discussed on previous calls, after two years of hard work, we're now fully organized into our two core business units, healthcare and industrial solutions. This structure distinguishes us from others in the industry, allowing us to execute on what we do best, namely, solving the most valuable production application needs of our customers by offering the strongest and most complete portfolio of additive manufacturing technologies brought together with the most knowledgeable and creative application engineering teams in the industry. The double-digit growth in our core additive manufacturing business that we're now experiencing, even in this difficult market, validates our approach and gives us confidence in our future. To meet the increasing demand that we're now facing, We're making key investments in new products and in our operating infrastructure, combining rigorous financial discipline with an overlay of strategic perspective on future value creation for all of our stakeholders. Despite the challenging macro backdrop, I'm happy to say that 3D Systems has started off the year on a strong foot, and we expect 2022 to be a year of exciting growth and investment as we continue to strengthen the company for the future. I'll keep my comments brief today as we have our investor day next week where we plan to share more detail on our vision and strategy for the future. Today I'll share with you a few key highlights from the first quarter. On the top line, while supply chain challenges were a significant headwind, we delivered double digit revenue growth over Q1 of last year when adjusted for divestitures. We continue to see increased demand for our products across both business segments, At a business unit level, our industrial solutions business continued to accelerate in both Europe and the US, in this case delivering growth of over 15%, excluding divestitures of non-core assets. This continued strengthening validates our observation of increased adoption of additive solutions among the world's manufacturing community. Particularly strong was the demand for high-precision micro-castings. This is a reflection not only of the printing technology itself, but the unique materials we've developed that enable casting of highly complex fine structures and a deep understanding of the workflow for optimum economics for these solutions. Healthcare growth of approximately 5%, excluding divestitures, was softer than we would have initially anticipated when we started the year, being driven in part by the introduction of our new DMP350 Dual, a high productivity version of our well-proven metal printer, the DMP350. which has been a mainstay for many of our healthcare customers in recent years. These customers are now qualifying the new dual laser system and updating their procurement plans to optimize their production workflow, which in healthcare takes careful planning and formal approvals. These acceptance qualifications are proceeding very well, and we expect increasing sales of both our 350 platforms later this year. In addition, COVID resurgence and the resulting postponement of optional elective procedures are particularly impactful in healthcare, as certain customers delayed capital purchases and experienced slower than anticipated growth rates. Given the underlying fundamentals and customer feedback on market conditions, we expect these factors to lessen as we move through the year. To support the strong engagement and demand that we're seeing from our customers broadly, we're continuing to invest in both our product portfolio and core technologies, as well as in our business infrastructure, including information technology, finance, and accounting, investments that will enable us to efficiently scale for double-digit growth that we see ahead. The fruits of these investments will become increasingly apparent as we move through the year, but even in the first quarter, we announced several new opportunities that we're really excited about for the future. First was our investment in a unique company called Enhatch, which brings to us another unique software solution for use in our healthcare business that will further strengthen our core capabilities. More specifically, this software solution is directed at the personalized healthcare solutions market for which we have a long established market leading position. In short, through the use of artificial intelligence, the enhanced software streamlines and scales the design and delivery of patient specific medical devices by automating the planning and design process. These efficiency increases will further the growth of personalized healthcare solutions, improving patient outcomes, and reducing treatment costs for hospital systems. In addition, in the first quarter, we announced our joint venture with DSUR, the Saudi Arabian Industrial Investments Company. This venture is designed to bring additive manufacturing into the Middle East and North Africa by enabling domestic production capabilities within Saudi Arabia. We believe this investment will accelerate the adoption of production-scale additive manufacturing, particularly in the oil and gas sector, utilizing our leading polymer and metal technologies. and then expand to additional market sectors over time, such as industrial, aerospace, and healthcare. The partnership highlights the increasing focus of additive manufacturing by large global organizations and our opportunity in important and largely untapped market verticals, such as oil and gas. This new venture is expected to begin ramping in scale in the fourth quarter of this year. And finally, this past quarter, we announced a very exciting new product platform, the world's first synchronous dual laser SLA printer. It delivers up to twice the speed and three times the throughput for cost-efficient, high-quality production manufacturing. This market-leading platform reinforces the strong position we've had for decades in stereolithography, in this case addressing the unique requirements of production applications while leveraging our portfolio of advanced polymeric materials and our software capabilities. We've begun taking orders for this new printer and are seeing strong demand in both healthcare and industrial markets. Specific to our healthcare business, I'm very pleased by the recent 510K clearance from the FDA for our VSP bolus, a solution designed for improved radiotherapy treatments. Approximately 50% of patients that are diagnosed with cancer receive radiotherapy as a part of their treatment plan, which this translates to millions of procedures worldwide each year. To help target the radiation on the desired location during a treatment, the radiotherapy provider often uses a bolus, which is a flexible material that's meant to conform to a patient's anatomy. A poorly constructed or off-the-shelf bolus can often leave large gaps between the device and the patient's skin, which can result in insufficient or unintended dosing levels. It may also expose adjacent anatomy to undesired radiation. With our VSP bolus solution, 3D systems can design and deliver boluses that are customized to a patient's specific anatomy and treatment plan, improving the effectiveness of the radiation treatment and the productivity of the treatment center. This mass customization of printed devices for healthcare addresses both patient outcomes and provider costs, which is the fundamental goal for all of our healthcare solutions. We've begun marketing the BOLUS solutions with key customers and expect to see solid demand for this family of products in the future. This is but one example of a broad trend in healthcare toward mass customization, enabled through 3D printing of patient-specific solutions. This is the key growth driver for our healthcare business across all of our end markets. In addition to the 510K for our new BOLUS product, within days of closing our acquisition of Cumobus at the end of the quarter, we were able to apply to the FDA for 510K clearance on the use of printed peak polymers for cranial maxillofacial reconstruction indications. We expect this solution will be the first FDA-cleared 3D-printed peak medical device. Camovus brings this advanced polymer technology to our healthcare business, which will serve as a complement to our existing titanium implant solutions, allowing surgeons to optimize individual patient treatment plans. Customer interest in these solutions is very strong, and following FDA clearance, which we expect later this year, we believe adding the Comofus product line will further solidify 3D systems as a leader in 3D-printed cranio-maxiofacial and orthopedic implants over the full range of metal and polymer-grade solutions. Once these initial indications are approved by the FDA, others will undoubtedly follow, driving exciting growth in the years ahead for our orthopedics business. So to quickly summarize, while the first quarter is typically a seasonally slower quarter for us, it was clearly impacted by the significant headwinds I mentioned previously. We were still able to deliver solid double-digit revenue growth versus last year, again, when adjusted for divestitures. Looking ahead, we expect the remaining quarters to be even stronger, following a pattern similar to the seasonality we experienced last year. Supply chain costs and inflation levels remain elevated and have clearly impacted our results. However, we're taking continued steps to mitigate their effects, which Jagtar will speak to in a few moments. In total, we're reasonably pleased with the first quarter results, especially given the macroeconomic conditions and ongoing geopolitical events, which we hope will abate as we move through the year. Importantly, our results show that demand for additive manufacturing and production environments is resilient and continues to grow. Even in these current less-than-ideal conditions, Industries are recognizing that the benefits of additive manufacturing can help protect them from the risks such as supply chain disruptions and skyrocketing costs. With that, let me turn the call over to Jagtar, who will now describe our first quarter financial results in more detail. Jagtar? Thanks, Jeff.