Good afternoon and welcome to 3D Systems’ Conference Call and Audio Webcast to discuss the preliminary results of the fourth quarter and full year 2020. My name is Brock and I will facilitate the audio portion of the day’s interactive broadcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Thank you Brock. Good morning and welcome to 3D Systems’ Conference Call. With me on the call are Dr. Jeffrey Graves, our President and Chief Executive Officer; Jagtar Narula, Chief Financial Officer; Andrew Johnson, Executive Vice President and Chief Legal Officer and John Nypaver, Vice President and Treasurer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. For those who have accessed the streaming portion of the webcast, please be aware that there may be a few second delay and that you will not be able to pose 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 today'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 will be against our results for the comparable period of 2019. Now, I'm pleased to turn the call over to Jeff Graves, our CEO. Jeff?

Thanks, Melanie. And thank you all for joining our call this morning. Before we begin, let me wish all of you a healthy and happy new year ahead. 2020 was an unprecedented year for everyone dealing with the COVID virus. But I'm happy to see improvements around the world as the new vaccines are being distributed in increasing numbers. I trust that 2021 will be a much better environment as we emerge from this crisis period. Before discussing our progress in 2020, let me comment on the postponement of our 10-K filing. As you know, one of our key actions last year was to begin divesting assets that were not core to our additive manufacturing business. We quickly prioritize the sale of our two software businesses, GibbsCAM and Cimatron that were focused on subtractive or machining technology. This divestiture while complex to execute went very well and we closed at the end of the year, which allowed us to eliminate our debt and have cash on the balance sheet for future investment.

Thanks, Jeff. Good morning, everyone. Let me begin my commentary by reminding everyone that the financial data that we are discussing remain subject to final audit by our independent registered public accounting firm. As a result, our actual results may differ from the anticipated results discussed. Next, I'd like to discuss the presentation of our numbers. As Jeff discussed earlier, in the fourth quarter, we achieved a development milestone in our regenerative medicine efforts. This triggered a cash payment from one of our development partners related to this achievement. That payment and our growing initiative in regenerative medicine prompted us to re-evaluate our accounting methodology for this contract. As a result of this analysis in our earnings release, we have recast numbers for prior periods to reflect this accounting change, which is also reflected in my commentary on this call. However, it is important to note that this recasting has only a minor impact on the numbers and does not have any impact at all on our on our bottom line reported results. In addition to be extremely clear, when viewed in the context of our overall revenue growth in the fourth quarter, the impact of this payment was immaterial to our results even if the payment would have been entirely excluded. We would still have seen year-over-year growth in the fourth quarter. Now moving on to the numbers, starting with a look at the full year 2020. 2020 revenue of $557.2 million decreased 12.4% compared to the prior year, primarily due to the impacts of COVID-19, the effects of which occurred most severely at the onset of the pandemic, with a strong rebound and activity in the second half of the year. As we discuss our results in the future, it will be important to compare our growth to…

Thanks, Jagtar. In 2020, we completed the reorganization and restructuring of our company to drive growth in our core businesses successfully achieving our targeted cost savings while focusing on delivering application solutions for our customers. As a result, we're now a company with a strong focus on two key markets, healthcare and industrial solutions, and one that has a much more streamlined and efficient cost structure. We started 2021 by completing the sale of our Cimatron and GibbsCAM software businesses and we'll continue to see cost savings from our restructuring efforts throughout the year. We'll continue to explore divesting non-core assets and look to grow our customer relationships through focusing on application solutions and our most exciting growth markets. We believe revenue in our core business centered around a solutions based approach to additive manufacturing will grow rapidly moving forward. And we'll selectively invest for growth opportunities, like regenerative medicine, materials development, and on-going improvement in our product lines. Many may ask what rapidly means in terms of growth rates. All we can say today is that uncertainty remains around the pace at which COVID impact will recede and the global economies rebound, we're hopeful that the momentum continues to accelerate and with that, we'll be able to deliver double digit growth rates in our core additive business in the year ahead. But these next few months will ultimately determine this outcome. What I can say with certainty, is that our continued focus on operational execution, we are very excited about the trajectory we're on and the future value we expect to bring to all of the stakeholders in our company. And with that, we'll now open the floor for questions. Brock.

Thank you. We will now be conducting a question-and-answer session. Our first question today is from Jim Ricchiuti of Needham & Company. Please proceed with your question.

Thank you. Good morning. Just a question, I wonder if you could Jeff maybe give us a little bit of a sense as to how business is trending thus far in the quarter. We've got about a month left. And I guess where I'm going with this is, if you could talk perhaps to the seasonality Q4 to Q1 Yeah which in past years, we've seen declines. And we're in the high teens to I think it was 25% last year. So what I guess I'm asking is whether there was, perhaps unusual strength in Q4, maybe in medical that might lead to more seasonality in Q1 of this year, just trying to get a sense as to how the business is shaping up Q4 to Q1. Thank you.

Hey, good morning. Good morning, Jim. Good to hear from you. Yes, that's, Jim, that's just kind of has a million dollar question. It's a competition of factors out there right now. So yes, we do expect, kind of normal seasonality Q4 to Q1, the real question is, there is a rising tide of applications. And I would tell you, I'm particularly excited around health care. I think a lot of folks put off health care treatments in during the COVID period. And they've come back strongly and in both dentistry and other medical applications in obviously the fourth quarter was just tremendous. And I would expect that healthcare momentum to continue provided hospital stay open. I'm very encouraged about the and you probably read as much as I do about the declining certainly death rates but even hospitalization rates from the from recovery now with the combination of master vaccines. So that's really encouraging because hospitals can then address this backlog of patients that need surgery, need devices dentists, people that need work on their, on their teeth or mouth. So those are all really good for our healthcare business, I would expect that to continue to have a very strong look ahead, again, with just a distant caveat around COVID on that market. The and it's more of a short term concern than long term, I think, once we get through summertime, unless these variants in the virus proved to be substantial, it looks like that momentum will continue and just continue to accelerate as the world opens. And probably at an even faster clip Jim, frankly because there's a there's a big backlog of demand. On the industrial side, it's a little it's a little dicer in the short term, because it's spotty. You run into countries…

Got it. That's helpful. On the high speed fusion, just final question, interesting announcement that you made. And I wonder if you could give us a better sense as to when it might be available in 2022. And, how it is perhaps differentiated from your other polymer printing solutions?

Yes, certainly, Jim. And I, on the on the launch day, we said, we've certainly demonstrated capability on the machine. We have some more, it's more normal industrialization and move into manufacturing. So I'll hedge a little bit on the exact launch date in 2022. I'm confident we'll have it out in the market in 2022. And it'll be out there, I think, significantly, in terms of the benefits of the product, Jim. It's a fantastic product. It -- are the numbers we've publicized are over three times faster than the current technology that's on the market today being used, and a much larger workspace and higher temperature capability, which really opens up a broad range of polymer solutions, particularly for aerospace and, and auto demanding automotive parts. So we there is an existing market out there that's substantial. And we estimate that at over $400 million today, I think this machine has a really good chance of over time, taking a nice share of that business. And then I think when people will actually measure the economics and the throughput, it'll open up some new markets versus competing technologies. So we're very bullish. I am I am thrilled to be able to offer a portfolio of materials when we launch the platform. So there won't be much of a delay between launching the machine and launching materials for our customers to use, which is kind of our trademark, that's what we like to do. And just like the old cartoon we all grew up with Roadrunner versus the Coyote . I think this thing's going to run circles around it. I'm really really bullish on it Jim.

The next question is from Greg Palm of Craig Hallum Capital Group. Please proceed with your question.

Yes, Jagtar, Jeff. Thanks for taking the questions here. Just starting off, the healthcare revenue, I think was really eye opening and just kind of curious how much of the, maybe the upside to that was, due to timing of large projects? I don't know if that was a tailwind at all, it sounds like, dental was maybe an outside driver, but just a little bit more color on healthcare specifically for Q4.

Yes, Greg, this is Jagtar. So, I wouldn't say was any sort of timing a large project. I mean, we, we talked about the milestone payments that we received, in my prepared remarks. That was almost immaterial to our Q4 results. So outside of that what we saw was kind of normal course of business and above printer sales, material sales, advanced manufacturing, and other parts of our, of our healthcare business. We were very pleased with a broad based nature of it. We saw very strong performance, as you saw in dental, but we also saw very strong performance outside the dental business. And, and none of that I would say was, was kind of. We had large printer orders, but we also had good materials move in and other parts of our business. So none of that I would say is, is kind of non-recurring in nature.

Greg, I'll just, I'll just, I'll give you a little more color there. If if you pick up the numbers, as we went through the script, the overall healthcare business was up tremendously. I mean, almost 50%, year-over-year, it was it was great. And what was encouraging is the breadth of demand. That even though if you separate out the dentistry applications, from the medical applications, broadly, medical applications grew 30%, almost 30%, and that, year-over-year. So I we are just thrilled. This, this concept of mass customization, where you can customize solutions for patients is really catching on. And it's a differentiator for additive manufacturing, in general, because we have, very strong application facilities and advanced manufacturing facilities that are approved by the FDA. We can access those, those applications relatively quickly. And we're really excited to see the both the pent up demand being relieved, as well as strongly growing new demands, new applications for the for additive solutions there. So we love the healthcare business. And there, it's got many facets to it. And longer term, the regenerative medicine, I don't want to oversell it in the short term. But you fast forward a few years down the road, this idea of implantable biocompatible products for long term use in human body is amazing, absolutely amazing. So, love the business, we continue to invest in it heavily. And we're excited about the growth.

Got it? good color. And then just as a follow up, can you comment at all on consumable trends within the quarter? Did that specifically return to growth as well? And if so, any sort of end markets or applications that drove that?

Yes. So, consumable trended bows, like we have seen historically. We don't break out specifics of our consumable numbers. But I'll say that that, it did grow, year-over-year, quarter-over-quarter. I wouldn't say there's a specific area that we saw consumable growth, healthcare was very good with it for us, in line with the overall the overall healthcare care business. But it grew across all segments of our business.

Now, Greg, I commented briefly in the prepared text, about our, our strong focus on supporting customers over the life of the product once they purchase it. And the certainly the consumable aspect of that is a big deal, as is software upgrades. Our printers last generally over 15 years in many environments out there. And we want to make sure we're delivering increasing value over the life of that machine. So they may make a capital purchase up front, but we want them to get more and more use out of it over time. So we reorganized our go-to-market team to support that activity. And what will fuel the growth there is the software and materials that feed the system. So we want them to optimize their printing platform every day, and then obviously get the most value out of it in terms of printed parts. And that's often with our own materials that we provide them and they've been optimized for printing. So we love that formula, customers like it. And that's more and more our go-to-market strategy over the life of the machines.

The next question is from Brian Drab of William Blair. Please proceed with your question.

Hi, thanks for taking my questions. I'm looking at the gross margin, first of all, and you said some of tranche should be 300 400 basis point headwin that's what I was expecting. The cost cutting program, though, as it was laid out, had me thinking that, 40 million of the 100 million coming from the cause line. And the commentary thus far, have me thinking that's about 30 million would be out of the 2021 numbers. And that should have a positive impact on gross margin about 600 basis points. You did 43% gross margin this year when volume was down severely. So I would think that baseline expectation based on information that analysts had without any volume recovery, should have been about 46% for 2021. And more, if you just helped me bridge from what I was thinking was going to be closer to maybe 46%, to the 42% midpoint of the guidance.

Sure. Brian, what like I said, in my, in my prepared remarks. So the Cimatron divesture was about a call it 300 basis point to 400 basis point drag on gross margins. Right. Now on the on the cost savings initiatives, we said, $16 million we achieved in 2020. About 30% of that I would say was on the COGS line. So that would give you about $18 million of flow through in 2021, some of which was, actually recorded in in Q3 and Q4 2020. Right, we did achieve those numbers during the year. So the gross margin for the year that you're looking at includes a portion of that, that 30% of the 60, that was saved. For 2021 as of now we're talking about $20 million additional savings, pent, like I said, pending the analysis to that year. Again, I expect that split to roughly be 30% of the gross margin line, that will be achieved over the course of the year. So you'd expect about half of that to actually kind of show up as achieved during the year. So you net that all out, that doesn't that get you back to 400 basis points of gross margin, you lost we expected to be, somewhere in between. And, and some of the uncertainty, will be dependent on growth of business and the level of the printer sales, right? Like we like we saw in Q4, printer sales were very strong printers, lower gross margins than consumables that drags down our gross margin a little bit. And so hence, has the range we're providing for 2021.

Yes, okay, that's helpful because I had 40%, coming from COGS. And I noticed 30 versus 42, for 33% more in costs coming out of COGS than I was assuming. So that'll help me get the math straight. Thank you. And then one other question. I think this is related to divested businesses. I'm just trying to understand if there was something divested in the fourth quarter, or revenue that was divested that was not in the fourth quarter, but was in the third quarter, because just trying to reconcile that I had seen in the press release, the pre-announcement that the industrial business was up more than 20% sequentially, on an organic basis. But the slides today are showing that industrial business was up 14%.

Yes, those are those are sorry, those are those are actually two different items. Let me address both of them. With regard to divestitures in the fourth quarter, we divested two small assets, one in China and one in Australia, to small on demand printing facilities. I would say that the revenue loss for those with from those in the quarter was relatively material. Regarding our pre-announcement for industrial at 20% plus of sequential growth versus the 14.2% that were in our kind of actual announcement. The difference there was frankly, just a mischaracterization of some of our revenue from healthcare to industrial and the pre-announcement. We have some small healthcare customers, small -- think small hospitals and alike, highly geographically dispersed, that we mischaracterized, unfortunately as part of our industrial business when we did our pre announcement, but then as we were refining our numbers, we realized that those were actually health care numbers and reflected reflect that in our in our health care totals rather than our industrial totals. So that's what that's what put that number.

Right? Is the previous perhaps…..sorry.

It's a, it's a, it's a detail, but it's one that you know, with your following in the industry, you'll understand it. We so -- when you have an emerging customer and health care, we often deal with those on a geographic basis through our channels, some indirect, some direct, but it's through our channels. And the customers we call on out of our healthcare business directly, or through a very dedicated healthcare channel. Those are the ones that are easy to quantify. It's the collection of geographically distributed ones, that it took some refinement here at the end of the year to actually carve out and attribute those to the healthcare business. So there was some movement and revenue between the two business units. As we clarified those small customers, and they are, they're potentially very important for the future, but we call on them initially from a geographic perspective.

Okay, got you. Thank you.

The next question is from Ananda Baruah of Loop Capital. Please proceed with your question.

Hi, good morning, guys. Yes, Jagtar and Jeff thanks for taking the question. And solid job guys so far. Yes, nice job with everything you just done. Just real quick, because I'll be a little sensitive of time here. Jeff, you had you had made mention about sort of double digit revenue growth during the prepared remarks. In that particular context, I’m just wondering, do you feel any differently today than you did 90 days ago about the potential to do double digit revenue growth, and there's nothing magical, per se about the double digit revenue growth? I think, just having a sense of what you guys think the potential trajectory through this year is? And if that's changed over the last 90 days, and then we'll have a quick follow up?

Yes, good morning. And Ananda, thanks for the kind comments. I, I had to chuckle because I think views of the world change every 90 minutes, not 90 days, it's a -- there's just so much short term volatility with the virus. I am really pleased, every announcement I see about vaccines and about just the benefits of social distancing, and mask wearing and the combined benefits, I'm really pleased with that strand. It's, it's kind of like, going on a speedboat through choppy waters, there's there are there a short term, there is still short term, issues that pop up geographically, which are frustrating, around shipments around servicing, and installing equipment, all that stuff. So there'll be some short term noise, which is why we're really reluctant to ever comment on, revenue in Q1, Q2, but behind that, there is just tremendous growth in applications. And I think, for any company running itself well, and it has some good, good position in this industry. There is a really nice tailwind of application growth that's available to folks. I like our combination of technologies very much. I like our certainly like our installed base, my goodness, I you know, we're printing a half a million parts a day in our customer base and I that builds up a wealth of experience you can draw on when you design new products, and it certainly fosters customer relationship. So I am very bullish on the industry. I'm very bullish on our company. I think the double digit growth rate is perfectly attainable in our core business. That view has not changed in the last 90 days to answer your question. The key for us, there'll be some short term noise, as we may or may not choose to divest some assets. So you got to always factor those out. But when you look at our core additive manufacturing business, I'm very bullish on double digit growth and gross margin improvement. I, we've set kind of a goal for ourselves of being, over 50% and gross margin in the coming years. And be supported by volume growth. I think that'll be exciting. Healthcare, in general brings a bit higher gross margin on average, than our industrial business. And all have very big modes to entry, the markets we're targeting. So if it's high growth, it's sustainable growth, and it's expanding gross margins. The exact timeframe on getting to those parameters, I can't be specific on. I, especially in the short term because of the COVID situation, but I would say it gets better generally each day. And, and we remain very, very excited about the business. We are coming in and excited and sprinting every single day Ananda. It’s -- I have never, never experienced before in my professional career, such an exciting dynamic environment. And those are the folks we're attracting to our company, it's the customers we're attracting to the business and it's simply fabulous.

The next question is from Paul Coster of JPMorgan. Please proceed with your question.

Yes. Thanks very much for taking my question. Jeff, you, have indeed done a great job this last year of bearing down on expenses, in addition to everything else. But I wonder some of the applications that you're going after now are already quite hard, at least, that's my impression. And the R&D associated with them, has potential to be sort of never ending, I guess. Is there a risk here that you? I mean, I guess, people are interested in the scalability of this business over the long haul. And the application centric approach to it means a lot of R&D just kind of accumulating. Can you scale on that R&D?

You know, Coster, that is a great question. We have to, you have to be really careful when you're surrounded by so many targets of exciting things to go do that you're disciplined about how you invest? Because you could, and you can see examples in this industry all around. People chase a lot of a lot of different directions, they spend a ton of R&D, try to do it. And we're trying to be a bit more selective than that. And go after things the application focus is, is in general, a high touch focus. It's a, we spend our R&D to be clear. We spend our R&D on the underlying technology. So printers, materials and software, that's where our R&D spending is. In SG&A there's a chunk of that that goes to application demonstration. And that's and that's exciting. We, we have way too many applications coming in the door each day, that all look interesting, and that we're getting more disciplined about saying, Okay, these select ones have really good return on investment. So that's how we're going to spend our SG&A. dollars. R&D, we're just trying to drive, efficiencies and, and address the broadest range of applications we can. We're tying that the development to specific applications, Paul, wherever possible, and we're not going to get out in front of our skis on frankly, overspending and losing money. It's, I think it drives a good discipline to say you want to be profitable, and generating cash, and use that cash prudently to invest for growth. We have tons of opportunity for growth around us. I -- I'm confident Paul we can deliver double digit organic top line growth over time, and not spend ourselves into oblivion. So that's in general, that's the direction I don't I don't believe I've answered your question very well. But if you heard discipline out of that, I hope, because we're just not going to chase every rabbit that crosses the field in front of us.

Got you. Okay. And then the other thing, which is kind of interesting, I think for investors is just the proliferation of companies in the space right. Now, it seems like it's a large market. I'm sure there's white space out there. But to what extent are you going after the white spaces where no one else is playing versus head on competition? And where there is head on competition? Do you see pricing becoming a consideration yet? Or is it still a sort of value so?

Yes, no, good, good tough questions, Paul. So in terms of whitespace, the white space, Paul, and the I would I would characterize it, yes, we're going after a lot of white space related to new applications, where customers are coming in and saying, hey, look, I've always made this this very simple geometry by machining. I'd like to make it out of additive. But it has to have very unique mechanical properties. And in addition to a fancy geometry, those are ones we love, because we're up against really no one else. And we can bring our materials expertise to bear and our software, and really, really take our printing platforms and make the most of them. Customers then tend to run with those. And I call that white space. They're applications that were not additive before. And across both healthcare and industrial Paul, there's, there's tons of those, there's many, many of those. What I don't like is where you have a customer that's used additive for a long time. They're now trying to drive it's a standard components. And there's five different printer companies, they're competing with me using a very standard off the shelf material. Those are not those are not great businesses for us. So we tend to steer toward industries and applications that get the most bang out of additive. And it's often with a unique of a very good printer itself. But a unique combination of software with that printer and materials that go through that Paul. If you can bring those to bear in a unique way. And the epitome Paul was, was what we've seen in regenerative medicine I -- we just had a there was an article run on what we're doing in Forbes magazine a few weeks ago. It is it is amazing. A combination of materials, software printing and the application combination. That's the white space that we love. And we're going after it. There is increasing competition in simple printer technology because the components are becoming a bit more off the shelf. So low end applications broad based, those are those are becoming commoditized. And they're just not our business. That's really not where we're going. So we tend to develop more and more specialized, specialized with significant market opportunity applications and hardware software materials around it. Does that. Does that all make sense to you?

It certainly does. Thank you very much, Jeff.

Thanks, Paul.

The next question is from Wamsi Mohan of BofA Securities. Please proceed with your question.

Yes, thanks for putting me in. You're purely focused on healthcare and industrial. I was wondering if you could maybe share how much of your baseline 513 million of revenue does not fall into either of those categories? And if all of that is up for divestiture, and what what's the sense of urgency around that? You noted that the assets are good in their own right, but just don't not core to you, now that your balance sheets in a much better place? Is this going to be a quick process, or is it going to be a slow process? Any any holiday would be helpful?

Yes, it's those are those are really good questions. This – anyway I like to paint it as black and white, in the core outside the core, is it's simple to think about. In reality, there are assets that, are in a grey zone in between. And that's so those are tougher calls. Yet, you'd really have to take a hard look and say, how much what's best in terms of value creation. And one of my acid test always uses is, is the business worthy of investing in, is there a good return on investment? And if you own a business where, where the incremental investment is, it does not have a good return, or it doesn't make it up your priority list in returns, you have other better things to do with your money. Those businesses, generally you should feel a drive to sell and let them be owned by someone else that will treat them as their highest priority. We have some really exciting opportunities in additive manufacturing, more and more than we can possibly run after every day. And so non additive technologies, things that are even borderline on that are of lower priority to us. And when it's a lower priority, I'm definitely have a mind get rid of it. Not because they're not good businesses, I want to be clear, they're really good. But they need to be owned by somebody that will love them and nurture them and treat them as their highest investment priority. So if it works this way down our list, when we rank our priorities, we tend to get rid of the ones that are lower on that list. It's better for the customers, the employees, and certainly our shareholders. We’ll reinvest that cash into our core business where we have tremendous growth opportunities.

So Jeff, what do you say off the 513? Like how much it falls out of healthcare in a nutshell?

Yes, it's, in general, I would say it's, it's, by definition, quite little. But in bear in mind, industrial is a very broad word. So how much of it? The key question is, how much of it is additive? How much of it is really integral to additive manufacturing. And if you say it that way, we still own assets that are predominantly exposed to non-additive markets. And those are the ones we really look at. And there's two options, we either convert them increasingly to additive manufacturing, and we hang on to them, or we sell them and take the cash and invest in the core business for, faster growth and margin and margin expansion. So is that it conceptually, it's that simple. But you have to find a buyer that, really wants the assets. And because some of these are, in this came up earlier about gross margin volatility. Some of these are really nice, gross margin businesses. It's just under our ownership, we're not going to invest a lot for growth, or they're a lower priority and they should be owned by someone else. So I can't give you a it's very hard to give you a percentage of what is what is, not industrial or healthcare. In terms of non-additive, it's not a very it's not an extremely high percentage, but we still have some assets that are not additive.

The next question is from Noelle Dilts of Stifel. Please proceed with your question.

Thank you. And again, congrats on good performance in a tough environment. You covered a lot of ground in the Q&A, but first, I just want to go back to a couple of questions and just try to get to, I guess, ask them in a in a slightly more granular way. So first, going back to Paul's question on, on R&D investments, you mentioned you'll see discipline there. That right now your R&D is running, I think it kind of the lowest level since 2014, makes sense in a COVID environment. Do you think there's, are you looking moving forward at kind of scaling? Do you think there's opportunity to kind of pull that back a little bit more and leverage that more? Or do you see that rebounding a little bit as we move into recovery in 2021? Thanks.

Thanks. Thank you for the kind comments, I appreciate that. In this industry, I would just give you a very general comment. This industry, I think you can spend, nominally spend 10% of revenue on R&D, and deliver double digit growth. If you're running a good business, you have a good range of technologies. And you can drive double digit organic growth in this industry, I believe, at a 10% kind of number. Now, there may be years where you say, gosh, I have this really exciting opportunity two years or three years out, and I'm going to spend an incremental 1% or 2% on that. That's fine. I, you can do stuff like that, in the short term, the discipline we want to have is to is to just draw a line somewhere and say, that's what we can afford to do. And, leave it at that. I do not believe in long term money losing businesses, I think it's a, it lacks discipline. So we don't, come in have a mind every day to make sure we maximize, daily profits. But at the same time, we're not going to get on disciplined in R&D spend. And I think in the long term, if we do it, right, 10% of sales is a fine number. Now, I say that I I'm not sure how we'll end up this year with the revenue, with revenue being impacted by COVID off and on, and I'm not certain way. But in general terms, I would tell you that that's why I think this this industry can also be a strong cash generating business. I think the reason we're rolling out now adjusted EBITDA as a metric, is I look at, we moved from, single to double digit EBITDA performance through leading out of the business and a focusing of it. I like that. I think it's good. I'd like to see our gross margins, get to 50 and above. I think we can get double digit organic growth on 10% of our spend on R&D. And I think we'll just be disciplined in our SG&A to drive that. And then I think EBITDA margins, moving from the mid-teens into the 20s, is perfectly doable in this industry. It won't happen immediately. But I think we can that we can get there. If you run a good business you get there in this industry. And that's an exciting business. That's one that generates cash to reinvest and leaves you with excess cash on the balance sheet for opportunistic acquisitions in the future.

Okay, great, that's really helpful. And then kind of taking that that last point, and also revisiting the question on divestitures. So again, as you as you look at this process, the divestiture process, are you -- is this something you're that's ongoing, that could kind of be a multiyear process? Are you kind of looking to get the business to where you want it to be in 2021? And then, as you as you do build cash on the balance sheet through those divestitures and through generation ultimately, what, what are some of the key areas that you're really looking at in terms of investing through acquisition? Thanks.

Yes, great, great question. Thank you. So I'm impatient by nature. I really like to move out on things when you when you see what can be better to get it done. And, and we did that on GibbsCAM and Cimatron last year. It was a home run. I mean, we, we generate cash that really strengthened our balance sheet and those assets ended up in the hands of owners, that will really care for them and grow them in the way that they should be cared for. They were great businesses, and they just were not our businesses. So when we look at our other assets, there, there are some that we look at and say, you know that's closer to the core, but it's not quite there. So if we can generate enough value through a transaction and leave it in a better owners hands, if you will, for giving it a priority. We would take that cash and redeploy it. And so in parallel, so we look at assets, we can divest and increasingly we're looking at assets that we could invest in, either partially or totally to own and, and add to the core business. There are really great, great opportunities, especially around technology companies, small technology companies and things across our technology portfolio. Printer certainly, that's the obvious one people jump to. But if you look at materials and you look at software, we have an outstanding suite of software today. And but more and more customers want, red button, green button kind of solutions for optimization. And, and you can either as their software you can add on to make the make it increasingly user friendly, for example. Material, same thing. But what customers really care about is a printed parts, and the material is made of is absolutely vital. So we continually look at assets out there around materials, can we partner with folks? Can we can we acquire folks or acquire partial ownership and people that are really going to be deliver some unique material for printing in the future very exciting, really exciting stuff. So we're kind of running those processes in parallel, what can we divest what we invest in, because this industry is going to go through a nice growth evolution. And we, we believe, with our platforms were beautifully positioned, and we just want to enhance those. That's what we're trying to do. And will it happen in 21, I will make continued progress in 21. We're not driving ourselves to any specific timeline to get anything finished, because you never really are. But just for example, this opportunity would to partner with Jabil on the Road runner, very excited, really great stuff. Fast, high temperature, large machine for printing industrial parts, for really tough applications. As those come up, we want to have the cash to invest in them. Does that help?

It does. Thank you. Yes, that's great, great detail. Appreciate that.

Thanks.

The next question comes from Sarkis Sherbetchyan of B. Riley Securities. Please proceed with your question.

Hey, thanks for taking my question here. Jeff and Jagtar, I just wanted to come back to the double digit organic growth commentary. I think I just want to frame this right. What's your organic sales growth expectation for fiscal 2021? Like, how are you internally thinking about growing this offline? And I have a follow up.

Yes, and it's, you know, from the outside, it's hard. It's very difficult, this year is going to be a little tough to see, because they go what we define and think of as our, our core of core businesses. We do believe those are going to grow really nicely this year. And unless COVID really sets us back, I believe they're going to grow at double digit rates. Well, you'll struggle with me outside is we still own some assets that we would consider potentially noncore. And they are not directly related to additive in large part, and they're not going to be growing. So that will certainly mute the what's perceived as the overall growth rate of the business. But in our -- we are very impatient for growth in our core business of additive. And I really believe that, knock on wood, if the, if the workday is getting better, that will deliver a double digit organic growth this year. Okay. And we'll explain in earnings calls, what the results were, what they mean, is going to remain a little bit more difficult from the outside to, to predict the parts because some won't be growing and some will.

Thanks, I'm knocking on wood with you. So look into your EBITDA margin, you delivered 13%, this quarter. You talked a little bit about, mid-teens to 20s doable in the industry. I guess in the near term what's the business capable of and where do you specifically plan to take EBITDA margin, say, in the next three years or five years?

Well, I would hope to be over that goal in the next three years. I -- I said, I think if, unless, again, I I never, two years ago, who would have envisioned a pandemic. So, you always have to have that in the back of your mind. But the way I see this thing going is, our healthcare business is, is really firing on all cylinders and I and we're going to continue to fuel that engine add to it, grow it, it’s terrific. And it carries with a generally higher gross margins, and exciting growth rates, and very sticky business all the way around. Now, you have to be good to do it. So we're really focused on quality delivery, a lot of the underlying operational metrics that are required, and they are just absolutely essential. Because it's, direct customer impact, direct patient impact, oftentimes, and FDA regulated we want to do a really good job at that. So I would tell you that what will drive, the EBITDA performance are a couple of things. Overall volume growth and efficiency is there, supply chain excellence, obviously working right along with that, yet to get costs and efficiencies and operations, what will really help it is business mix. And, and so healthcare growth is really good in terms of driving margin improvements. In any margin you want to talk about, including EBITDA margins, and then the mix, the aftermarket mix, supporting our customers after they buy a printer, with materials and software wherever we can add value to their purchase. That's really beneficial to us. And it helps the customers a lot. And it's very beneficial to, to our financial performance. So we love the model, we're going to be investing heavily in the model. But with discipline, and I would expect EBITDA margins to regularly climb from mid-teens over 20. And gross margins, I don't like the level they're at now. So with that growth, we want to see gross margin lift. And our real goal is to get those gross margins over 50%. It will not happen overnight, but we will be on a steady trajectory of improvement. The choppiness will only come from unanticipated effects of COVID or divestitures, which could in the short term impact, and those parameters, because they carry a higher gross margin. Okay.

And one that we should, we should probably draw to a close, we let the time go a little long because we had a longer introduction, but very much appreciate everybody's every everybody's interest in the company, and our performance. Appreciate the feedback as always, and we're happy to follow up with you after the call. So thanks very much for joining today and for your continued support of the company. We look forward to updating you again in the quarters and years ahead. Thanks, everybody.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.