Good morning, and welcome to the 3D Systems Conference Call and Audio Webcast to discuss the results of the Second Quarter and first six months of 2014. My name is Britney, and I will facilitate the audio portion of today's interactive broadcast. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session (Operator Instructions) At this time, I would like to turn the call over to Stacey Witten with 3D Systems. Please proceed.

Good morning and welcome to 3D Systems Conference Call. I am Stacey Witten, and with me on the call are Avi Reichental, our CEO; Damon Gregoire, our CFO; and Andy Johnson, our General Counsel. 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 via the Web at www.3dsystems.com/investor. Participants who would like to ask questions at the end of the session related to matters discussed in this conference call should call in using the phone numbers provided here on slide three. The phone numbers are also provided in the press release that we issued this morning. For those who have access the streaming portion of the webcast, please be aware that there is five second delay and that you will not be able to post questions via the Web. The following discussion and assumptions to your question reflect management’s view as of today only and will include forward-looking statements as discussed on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today’s press release and our filings with the SEC, including our most recent annual report on Form 10-K. During this call we will discuss certain non-GAAP financial measures. In our press release slides accompanying this webcast and our filings with the SEC which is available on our IR Web site. You will find additional disclosures regarding these non-GAAP measures including reconciliations of these measures with comparable GAAP measures. Finally amongst otherwise stated underlying assumptions on this call will be against our results for the comparable period in 2013. Now I’ll turn the call over to Avi Reichental, 3D Systems’ President and CEO.

Thanks Stacey. Good morning everyone and thanks for joining us today. Let me begin by saying that we are pleased to report that strengthening demand for our design and manufacturing printer drove 126% increase in printer units sold for this category. Prints materials revenue increased 30% and services revenue expanded 38%. Total revenue for the quarter increased 25% to 151.5 million on a 77% higher bookings over the last quarter, resulting in a record 31.9 million of backlog as we exited the quarter. That included 23.1 million of orders in hand for professional, production and consumer printers, representing a 29% sequential increase in printer bookings alone. Several factors contributed to the expansion of our order book; first, higher demand for our direct metal printers that continues to rise faster than we could add manufacturing capacity; second, booked orders for polymer printers that were scheduled for later deliveries by our customers; and finally, our decision to postpone shipments of new consumer product to improve user experience laid to an expanded backlog of our consumer orders. These factors shifted a portion of our organic bookings into future periods and temporarily suppressed our organic growth rate to 10% during the quarter. Our gross profit margin shouldered the transitional effect of concentrated new product launches as well as the absorption of legacy product obsolescence and manufacturing expansion costs. Together these factors and changed mix compressed gross profit margins from 400 basis points from the prior year’s quarter to 47.8%. While it’s clear that these transitional forces temporarily pressured our gross profit margin, a detailed examination of the specific drivers confirms that our fundamentals are intact and our gross profit margins are poised to rebound and resume their expansion trajectory. We effectively kept our operating expenses flat on a sequential basis even with continued investments…

Thanks, Avi, and good morning, everyone. For the second quarter we announced net income of $2.1 million and earnings per share of $0.02 and on a non-GAAP basis we earned $0.16 per share. For the first six months we increased revenue 34% from the prior year to $299.3 million and reported net income of $7 million and earnings per share of $0.07. On a non-GAAP basis we earned $0.30 per share. Printers and other products revenues rose to $61.9 million and made up 41% of total revenue. Higher placement utilization of our plastic, nylon and metals printers continues to fuel strong materials revenue which increased 30% contributing $38 million in revenue. Service revenue rose 38% to $51.5 million and made up 34% of total revenue. We continue to experience robust growth in all geographic regions during the year, with a 45% revenue increase from Asia Pacific, 32% revenue growth from Europe and 16% revenue increase from North America. Materials revenue continued to benefit from strengthening design and manufacturing demand, integrated material sales which more accurately represents the strength of our install base grew by 35% to $27 million for the period, and 41% for the first six months. We expect materials growth rates to rise further as our industrial printers install base expands our newer and faster printers and the introduction of higher performance materials. Demand for our direct metals printers continues to rise faster than we can add manufacturing capacity. After maxing out our Phoenix manufacturing facility, we are bringing a system manufacturing facility online in the United States during the third quarter and expect to enter 2015 with ample production capacity for metals printers. I want to remind everyone that when we acquired Phoenix last July its revenue was in a multi-year decline. And under our leadership, Phoenix…

Thanks Damon. During the second quarter we continue to expand and refine our business in line with our growth initiatives. We acquired Medical Modeling and that added propitiatory virtual surgical planning, guiding and delivery of 3D printed medical implants and devices. We announced the acquisition of Robtec in Brazil to establish a strategic sales and service platform and a scalable gateway into Latin America which we now expect to close later during the second half of this year and we added several major distributors including ScanSource, Konica Minolta and Cannon Marketing Japan that we expect will contribute meaningfully to future growth. We advanced the development of our continuous high speed fab-grade 3D printer platform and related polymer and conductive materials development and we are convinced at this point that this advanced manufacturing platform can significantly increase 3D printing production speeds and successfully address the needs of many industrial and consumer goods companies. We launched our digital educational initiative at the recent White House Maker Faire to promote and advance digital literacy and education by empowering and equipping students with 3D design scanning and printing capabilities made by 3D systems. And we also secured an additional 200,000 square-foot manufacturing facility in Rockville, South Carolina to further enhance and expand our manufacturing capacity and capabilities and we expect that this facility will become fully operational during the first quarter of 2015. I also wanted to note or by web an update, share with your that our CFO search has attracted a number of highly qualified candidates, and accordingly we expect to successfully fill this important position during the second half of this year. As a reminder, and as both the Damon and I have said previously, Damon plans to continue to act as our CFO until we find his successor, at which…

(Operator Instructions) Your first question comes from the line of John Baliotti with Janney Capital Markets; please proceed.

Damon, I was just wondering with respect to the comments you made about gross margin, it looks like about half of the pull-back was you delineated those two categories, and I guess framing the first half gross margin with respect to your comments in June about expecting leverage in the second half and further in 2015, is all that on track, I mean is this kind of what you were to a degree with some one-time items, of course. But is this kind of -- will this still keep you guys on track for that kind of a shift in the second half?

Yes, we believe so. I did delineate a couple of factors. One was that one-time write-off which was 1.3 percentage points. And the other is mix, not just between the different categories, but within the categories. And our view, that when we're looking forward, especially as we are expanding more and more into the manufacturing areas that we talked about, we have a good vision of what those future sales will be in certain areas, especially materials usage as these machines come online. So that’s what gives us confidence. And we do believe that we rebound back into the levels we were and our gross profit margins will rebound, in total, back to those levels.

John, we together conducted, under Damon’s leadership, a very careful and complete analysis. We have fairly good visibility of the remainder of the year in terms of the puts and takes that could influence gross profit margins. And we concluded that excluding these transitional factors and one-time items that Damon already talked about, the fundamentals are intact. We expect material recovery very quickly, and continued expansion and we also expect that in a closed concentrated start-up of all the new products, printers will resume as well. We also expect to continue the expansion in our own demand part which favorably expanded during the quarter and we expect additional oomph there for the remainder of the year.

Your next test income from the line of Jim Ricchiuti with Needham & Company; please proceed.

I realize there are a number of moving parts in the printer revenues, you've recorded very strong bookings, backlog, and clearly it sounds like a good quarter in metals. But I’m trying to get a sense, if we look at the core plastics printers, what is -- you’ve clearly seen a deceleration of growth there. What gives us the confidence that there hasn’t been either some slowing in the market, or potentially some share shift?

Well I think several factors give us confidence that actually the underlying strength is there Jim. First that if you look at the category of design and manufacturing unit sales are up 126%. If you look at it as a revenue category which also includes materials unit et cetera, it’s up I believe by 28% or something like that. And while metals contribute to that, there is no question that our polymer printers including SLA and SLS are contributing substantially to that growth. And also Jim when we look at what’s in our backlog, what’s in the order book that has expanded substantially for printers, there is a healthy amount of polymer printers or more specifically SLA, SLS in other plastic printers that we characterize in this category to give us the confidence that nothing is slowing down and that the demand will continue to be strong. And we certainly, Jim, don’t see any share shift. In fact the continued expansion of our bookings specifically in printers is at an all-time high.

Your next question comes from the line of Troy Jensen with Piper; please proceed. Troy Jensen - Piper Jaffray A question for Damon, if you look at the guidance you boosted the range by about 20 million. Could you give us any insight into how much you’re getting from Medical Modeling, Simbionix and Robtec or whether or not that is both are below that $20 million boost?

Well, we have a couple of things that have happened here, when we revised our guidance that included Medical Modeling, that’s (the acquisition area) [ph] and included an anticipated closing date of Robtec. As we said this morning that anticipated close date is still within this year but it’s been pushed out. And if you remember when we raised our guidance then we didn’t increase our EPS our non-GAAP or GAAP EPS guidance even with the addition but we didn’t decrease it, even with the addition of all the shares that we added from the raise, so some of that was offset by increased -- what we expect it would be increased profitability or contributed profitability from Robtec. With this now, this new guidance includes we expect that Simbionix will close in the next 30 days or so and it includes that acquisition but it also includes pushing Robtec out. So, it’s both. We didn’t really break down anything beyond that of what contribution (from each) [ph] that they are.

Your next question comes from the line of Steven Milunovich with UBS. Please proceed.

Thank you. You mentioned a delay in shipping the consumer products to improve the customer experience, what exactly does that mean? Were you having manufacturing issues, were there quality problems could you go into that a bit?

I am glad you asked that question. We conducted an extended data testing because we’re focusing on how to mainstream particularly the adoption of the new Cube 3 and the CubePro. And in the process in very close communications with dozens of data testers, we identified several user experience enhancements that we believe had the potential to competitively enhance our brand and we decided to take time to incorporate them even at the expanse of short term revenue pressure. And we’re happy to report that our rising orders suggest that we made the right call.

What kind of features you’re talking about?

We’re talking about differentiating features like the need to have automated setup in all when you plug so that you can play. We talk about enhanced multicolor printing capabilities. We’re talking about print speed and print fidelity areas that we determined when we compared and contrasted our user experience with what’s out there today that with the guidance and input from dozens of data testers we determine that if we take a couple of months to push harder we could have the superior user experience. And we decided to take the time to do that. As I said we have commenced shipments of the CubePro and we now anticipate shipping the Cube 3 over the next few weeks. And we believe that we made the right decision.

Your next question comes from the line of Amit Daryanani with RBC Capital Markets. Please proceed.

Thanks a lot. Good morning guys. I guess it's just a question of further -- could you maybe just quantify the impact you had from this customer launch delay? And if you could just walk through the timing of when you decided to push this product out? My suspicion is that 15 million of ex-inventory you have is potentially related to these delays. But maybe you could just walk through the impact on the revenue line from this?

I only heard part of your question but let me try to address it. What we said is that consumer revenue was held by this delay to about 7.4 million for the quarter but that we also booked an additional 7.7 million or exited the quarter with an additional 7.7 million of consumer bookings and that in July the order book continued to rise. We also included slide in our presentation that outlined all the new products that we expect to launch during the coming periods starting with explaining what’s going on. So CubePro is available. The iSense is available. Cube 3 in the next few weeks, same with our new touch which is the magical haptic pen for our consumers, Ecocycle which we announced together with will.i.am, our Chief Creative Officer at the White House, a few weeks ago, and a partnership with the Coca-Cola Corporation is expected in the fourth quarter. The [indiscernible] we just debuted at Comic-Con last week and we expect it to be fully commercial in the fourth quarter. And one of the we believe key movers in the fourth quarter is going to be the CubeJet which will be the first ever full color inkjet type product under $5000. And of course let’s not forget the ChefJet and the ChefJet Pro that are also coming in the fourth quarter. We believe that these kinds of products really differentiate our consumer offering in ways that others cannot do and it continues to really affirm the fact that not only do we see great potential in consumer product but that our approach to the 3-D lifestyle is very differentiated from those who just offer some plastic printers to end-users. And so we’re deliberately moving through it. Our plastic printers our much more differentiated and refined and carry with them, we think, groundbreaking features. But that’s only where our consumer strategy begins. It extends into software, it continues into the physical topography and haptics and it ends with some really meaningful prosumer experiences.

Your next question comes from the line of Ken Wong with Citigroup; please proceed.

You guys have historically felt the need to really make the market here with aggressive investments to drive adoption, and then so with Medical Modeling, [indiscernible], and Simbionix; it appears you feel the need to drive the healthcare vertical. Should we expect that you guys are not going to do something similar of course some of your other key vertical to further adoption?

Well it’s true that we have historically identified strategic opportunities several years before they became obvious to the rest of the crowd. And it’s true that we wisely invested when those investments were much more affordable. And it’s also true that in some instances we were willing to do some of the earlier heavy lifting of consolidating certain segments, as opposed to paying huge premiums when the opportunity became more mature. We have done it with service bureaus quite successfully, and I think that investments are returning very nicely. We have done it with some printer companies that were in decline at the time. Damon mentioned Phoenix this morning, we could also point to Z Corp a few years ago, two examples where we have identified the opportunities years ahead of the crowd and made very intelligent cost-effective investments and correlate them into tremendous growth stories. And we see healthcare, and 3-D healthcare, and particularly the opportunity to integrate and deliver a seamless digital thread on the 3D virtual reality, planning, guiding, simulation, instrumentation of personalized surgical procedures and printing of medical devices as a significant opportunity. It’s already our fastest-growing vertical for the third year in a row. Its generated for the quarter over $27 million. We expect it to continue to grow, and we expect to make additional investments. We said during our June investor call or investor meeting in New York, rather, that we are really turning our attention to several areas that could give us additional first mover advantage in key verticals and those first and foremost I mentioned medical, second was material, which we see is instrumental to our growth strategy, third, metals, I mentioned that we with the incredible success that we have had from our Phoenix acquisition that is just anniversarying, we plan to invest more in metals beyond just the design of a larger metal system that we will debut at Euromold this year, but that we want to make other technology investments in metal. It’s a hot area and it’s a high growth area. And finally manufacturing, we see advanced manufacturing that is grounded in 3D printing as a big part of our future and in these areas specifically we intent to deploy the available capital that we have and put it into good use sooner rather than later.

Your next question comes from the line of Holden Lewis with BB&T. Please proceed.

I wanted to just sort of hit you again on the gross margin. You're kind of talking about the mix as a mix within the mix. I think you cited maybe some pressure in materials even though it looks like the integrators were growing too faster than the overall business. I guess I was just trying to get a sense of can you give a bit more color on sort of what the mix within the mix is? Did you see sub-par growth out of software? What caused materials -- I am just trying to get more color on what exactly the mix problems were and the likelihood that they can reverse?

Well, one area that’s obvious to look that first comes to mind is that our materials margin decreased. That was a mix area and it happen to do with some the concentration of a couple of large orders was in a period of -- some different areas that…

Which are an anomaly at, or I should say for all intents and purposes a one-time anomaly related to a couple of specific situations that are not likely to reoccur.

And additionally we did talk about that the consumer business was held to $7.4 million because of the new products. The margin on those materials as they're being sold is very high that we’ve talked about before. So we expect that mix to rebound and to go back. So the biggest driver within that was the materials mix which again we said earlier we have a strong view into the remainder of the year. And then on the printer side, again the different mix of certain placements of printers between the categories can affect sales a little bit and with our backlog where we have, we see that mix changing back to what it historically has been.

Also Holden, it’s important to note that in a constant rate at new product launch period, the initial series of a new printer cost of goods is much higher than what happens as you normalize it into higher volumes. We have a period of pre-tooling series and other elements when we launched new product which very quickly within the few periods work their way out into normalized costs. And all of that is factored into the careful analysis that we did and that’s what gives us the confidence that margins not only will rebound but will continue to expend.

Your next question comes from the line of Wamsi Mohan with Bank of America. Please proceed.

Thanks for taking my questions. On the inventory write down can you give us some sense of how much was consumer versus not and how much was in the printers versus was there anything materials at all? And you have a lot of products launches coming in the second half. Do you think your inventories are appropriately aligned with the upcoming demand? Thanks.

First of all, there was nothing immaterial that write down specifically had to do with the Printers category. It had to do with the numbers of new launches that we had. We didn’t break out any -- the specific breakdown between those categories. And we do believe that our inventory is properly aligned for what the demand is and what we see again as backlog. And that is part of this. Our inventory increase that we have, part of it has to do with backlog, part of it’s not and as the timing of deliveries and revenue recognition where when it comes out and goes into backlog, if you're not able to recognize in this period, it goes back in the inventory. And the other part is the supply chain logistics for the manufacturing of these printers and all the new products that we’ve had and the demand that we forecast in the second half of the year.

And remember Wamsi that in the second half, as part of the alignment in inventory we’re shipping now the CubePro. We’re beginning to ship the Cube 3 in the next few weeks. We expect to ship the touch in a few weeks, then the Ecocycle and the 3DMe booth and the ChefJet in the fourth quarter. And in addition to that, we have several large frame systems that we're also in development of that will come into play probably sometime in the fourth quarter. So we think that our inventory is certainly well aligned with what’s to come and as we mentioned in our prepared remarks this morning, there is a rise in inventory of about $15.1 million that we expect to liquidate as these products are shipping. So expect additional cash generation from operations in the coming periods.

Your next question comes from the line of Jay Harris with Axiom Capital. Please proceed.

Avi, should we assume on Simbionix that most of their revenues are made out of Israel?

Simbionix is for all intents and purposes an American company that is headquartered in Cleveland, and a Company that has substantial R&D and manufacturing capabilities in Israel, but a company that has worldwide sales and distribution of revenue for the Company, if you look at it by geography, Jay, almost half of the revenue is generated, and this is for 2013, almost half of the revenue was generated in North America, another 30% from Europe, and the remainder from Asia-Pac and other parts.

Yes, I think it’s also important to note that the manufacturing capabilities are not just an Israel. They're in Spain, and they're in Ohio. So there is a redundancy in backup to all the areas that we will have.

Your next question comes from the line of Ananda Baruah of Brean Capital. Please proceed.

Could you Avi, go back over what the impact I guess with the dynamics from the polymer printer impact was this quarter, the SLA and the SLS impact. And then could you specifically give a sense of what SLA and SLS professional organic growth was for first half of this year, relative to last year? That would be really helpful.

Yes. So if you look at that category which was one of the slides, the design and manufacturing category year-over-year for the quarter was $144.2 million this year, $112.3 million last year, 28% increase. The vast majority of that was driven by our organic printers and materials. There was a smaller contribution from metals, but the vast majority came from those categories and we expect that to continue.

Your next question comes from the line of Sherri Scribner of Deutsche Bank. Please proceed.

I just wanted to get a sense if you could give us some detail on what’s included in the backlog in terms of the mix? It seems like the metal piece was very strong and there was a lot of pent-up demand there. And then just going back to the polymer question, can you just give us a little more detail on the delay in the polymer printers this quarter?

Okay. In terms of what’s in the order book, we have about $23.1 million of printers in the backlog. The remainder includes services and some software components et cetera. Within the polymer area, obviously of the $23.1 million in printers, a portion of it is polymer printers that were ordered and scheduled by customers for later deliveries than the June quarter. And in this overall mix we also had a total of about $7.7 million of consumer component in it. So those are the major elements of the backlog. Let me say again, since several of you have asked about polymer printers. We have -- a substantial portion of our order book is non-metal or polymer printers. And the demand for polymer or plastic printers is very strong and we expect it to continue to strengthen, not taking anything away from the incredible strength that we have in metals.

Your next question comes from the line of Ajay Kejriwal with FBR Capital Markets. Please proceed.

Maybe on the organic growth and sorry if you mentioned this, but any color by categories printers versus materials and services. And then is it possible to quantify how much impact, some of the issues that you’d highlighted in terms of delays et cetera, how much of that impacted the organic growth in printers in the quarter? Thank you.

So let me start by very simply reminding everybody that our materials were up 70% for the quarter. That is primarily organic growth and that for the first half it was up even higher. And more importantly, integrated materials continue to rise as well and amounted to 41% for the first six months. That’s all on the strength of our core polymer plastic printers. And we see that demand increasing even further. When you look at the organic growth, there are a few ways to look at it. The first way that you can look at it is that we exited the June quarter with an order book that is 77% higher than last June's order book. It represented a substantial sequential order book increase in bookings. And as Damon said earlier today and we’ve been saying it all along. Since the beginning of the year we said we expect to generate higher revenue in the second half than in the first half. Last year we generated 57% of our revenue in the second half of the year. We expect that a similar ratio will reoccur this year. So specifically if you just apply our historically 57% annual revenue distribution ratio, it suggests that for the second half, if you just look at what we guided today to, it will give you a growth rate of about 37% for the second half of this year and factoring into that that during the same period, less than 10% of our total revenue for the second quarter is expected to be generated from businesses that we acquired within the past year, the thing that you can come to your own organic growth rate calculation that will be in line with our expectations. I don’t think that we lost any organic growth trajectory in the quarter. Some of it just ended up in our order book, not in our recognized revenue.

Your next question comes from the line of Jason North with Jefferies. Please proceed.

Over the last three years looking at the second half, Q4 has represented between about 52% to 55% of the second half of revenues based on the timing of the product launches in the back half of 2014. Do you expect it to be skewed more towards the high end of that range or maybe above it?

It’s harder to say but one of the areas that you can look at is on the consumer side with the product launches here and we've listed out which ones are third quarter basically, which ones are fourth quarter and that obviously will drive some of these revenue shifts too we believe.

Yes, but importantly with that, what we want to say is we certainly expect greater consumer revenue contribution in the second half than the first half. I mean you all already know that we exited the first half with higher consumer bookings than we actually revenue in the quarter and that continue to rise in the July month. But I wanted to emphasize that to reach our raised revenue guidance that we provided this morning, we don’t made a great deal of consumer revenue contribution. So we think that even with just an incremental consumer revenue contribution we will hit our revenue guidance range. Of course we’re not slowing down or actually speeding up. But I just wanted to -- for those of you who think that somehow significant consumer revenue is going to keep the scale here, in our guidance we're counting on incremental increase in consumer revenue, not in significant increase happens, it’s an upside to the business model.

Your next question comes from the line of Prabh Gowrisankaran with Canaccord. Please proceed.

This is Prabh in for Bobby. I just had a couple of questions; one on the phoenix mill machines. I know you said it increased 55% quarter-on-quarter. You had provided the prior guidance of $25 million to $50 million. What’s your capacity now and is that still the expectation for 2014?

It’s true that metal printers’ revenue increase don sequential basis 55% and we’re bringing a second manufacturing facility online but we certainly expect to be able to have sufficient capacity to be in the range of the 25 million to 50 million that we guided to earlier in the year. And as Damon said earlier this morning, going into Q1 of next year we expect ample manufacturing capacity so that we once and for all catch up and hedge their capacity to fulfill what we expect to be and increasing demand for metal printers. And finally remember that our larger direct metal printer that we’ve been developing all the year is going to debut at EuroMold 2014 and be available for sale in the first quarter of next year. And that is on track to be completed timely and commercialize.

Thank you. That is all the time we have for questions for today. I would now like to turn the conference back over to Stacey Witten for closing remarks. Please proceed.

Thank you for joining us today and for your continued support of 3D Systems. A replay of this webcast will be made available after the call on the Investor Relations section of our Web site, www.3dsystems.com/investor.

Ladies and gentlemen that conclude today’s conference. Thank you for your participation. You may now disconnect. Have a great day.