3D Systems Corporation (DDD) Q2 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the 3D Systems Q2 2026 Earnings Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Vice President, Investor Relations, Monica Gould. Monica, please go ahead.

Hello, and welcome to 3D Systems Second Quarter 2026 Earnings Conference Call. With me on today's call are Dr. Jeffrey Graves, President and CEO; and Phyllis Nordstrom, Chief Financial Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP financial measures. In our press release and slides accompanying this webcast, you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures. With that, I'll turn the call over to our President and CEO, Dr. Jeffrey Graves, for opening remarks.

Thank you, Monica, and good morning, everyone. Today's call is accompanied by 2 important announcements: our earnings results and the beginning of a leadership transition plan, both of which I will address this morning. I will begin by reviewing a few important highlights from our second quarter and first half as well as provide updates on several of our key market focus areas. After that, I'll address this morning's leadership announcement. I'll then turn the call over to Phyllis Nordstrom, our CFO, who will summarize the quarter's financial results and outlook, and we'll then open the call up for Q&A. So with that, let's turn to Slide 5. A major theme clearly emerging this year is the return of capital spending by our customers in key markets. The timing is excellent given the intense focus we have placed on refreshing our product portfolio over the last 3 years. In the second quarter, printer sales increased by more than 45%, led by our best-selling DMP 350 metal printing system, our new SLA 825 flagship polymer platform and our multi-jet printing systems that form the cornerstone of our new denture product line. I'll comment on each of these in the context of their market drivers in a few moments. From a business unit standpoint, our Healthcare business once again delivered solid growth and remained the company's largest segment. driven in particular by strong demand for new printing systems in both medtech and dental markets. Industrial business revenue was modestly lower year-over-year as older systems in our installed base are now being increasingly replaced by our new printer platforms. Despite this dynamic, our 2 key industrial focus markets, aerospace and defense and data center infrastructure, both delivered strong double-digit growth again this quarter. I'll share a few highlights on those markets momentarily. And moving to Slide 6. Our newest generation of 3D printers offer levels of precision, economics and robustness that were only dreamed of a few years ago. These advancements are now proving essential to the widespread adoption of 3D printing in key production environments. One of the clearest trends is the accelerating use of 3D printing in metal component manufacturing. As we've discussed on previous calls, there are 2 equally important paths to producing metal parts, direct metal printing using laser powder bed fusion and metal castings that rely on 3D printed patterns as a critical step in the manufacturing process. To address each path, we've launched 2 important systems: our DMP 350 triple laser direct metal printer and our SLA 825 dual laser polymer printing system designed for high-quality metal casting patterns. Sales of both platforms into our key markets have been very strong with second quarter growth of roughly 90% and 125%, respectively, year-over-year. Given this rapid rise in demand for 3D-printed metal parts, we're also significantly expanding our internal metal parts production capacity. This is an important element of our growth strategy, and I'll touch on it in more detail in a few moments. The third breakthrough product we have brought into the market is the NextDent 300, purpose-built for the production of dentures. This platform is being very well received because of its precision and economics, enabling dental professionals to deliver a high-quality, durable product that improves the patient experience while increasing the productivity of their practices. These technologies will continue to enable our success in key markets for years to come. Now on to Slide 7. As proud as I am of our refreshed product portfolio, it would mean very little if we did not target these systems effectively at markets moving most decisively toward the adoption of additive manufacturing technologies. Four markets fit this profile very clearly: med tech, dental, aerospace and defense and data center infrastructure. Two of these sit in our healthcare business and 2 in our industrial business. Customers in these markets derive exceptional value from 3D printing from enhanced design flexibility that improves both performance and cost to reduce supply chain risk in an increasingly volatile world. With limited time on each quarterly call, I'll focus on a few key use cases that I hope will capture the excitement and momentum these 4 markets provide. Moving to Slide 8. I'll start with aerospace and defense with a specific focus this quarter on space applications. As everyone is aware, there's been a resurgence of interest in space access with applications ranging from new satellite constellations for communications to large-scale orbital data centers and even interplanetary travel. These visions are all enabled by the remarkable advancements achieved in reusable launch vehicles. These enormous rockets have already reduced the cost of access to space by an order of magnitude and the next generation of fully reusable vehicles is positioned to drive cost down even further, making these large-scale applications in space far more economically viable. The impact of this breakthrough in rocketry is clearly visible in launch cadence. A rocket to space is now launched roughly every 2 to 2.5 days. In short, what used to be a yearly total for the entire global industry is now being achieved by a single company in a matter of weeks. This acceleration is expected to continue as reusability improves and costs decline further. A critical enabler of this progress has been the development of advanced rocket engines designed for high flight rates. These engines use a sophisticated combustion architecture that improves efficiency and durability while reducing maintenance between flights. Additive manufacturing has been integral to this evolution, both through direct metal printing of complex geometries and even more so through high-precision investment castings made from 3D printed patterns. Our SLA 825 dual laser system launched late last year is specifically targeted at these advanced casting applications. As evidence of its early success, in the second quarter, we received one of the largest industrial printer orders in our company's history, driven by demand for casting patterns used in next-generation reusable rocket engines. Production of these engines is expected to grow by nearly an order of magnitude over the next decade as launch cadence continues to accelerate. These capabilities are helping make fully reusable heavy lift vehicles more practical and are contributing to the sharp reduction in the cost of access to space. Moving to Slide 9. Let's turn to the healthcare business with an update on our dental market. Of the 4 dental markets, straighten, protect, repair and replace, 3D printing has already proven its value at scale in tooth straightening. Building on that foundation, the next large growth opportunity is converting the historically labor-intensive replace market for dentures into a fully digital 3D-printed monolithic denture product, an objective we have been intensely pursuing for the last 3 years. With more than 30 million denture wearers in the U.S. and nearly 4 million new dentures sold each year and comparable numbers in Europe, the end market opportunity is measured in the billions of dollars. Based on these estimates, the corresponding revenue potential for our company exceeds $150 million annually in the U.S. in printers and consumables sold to the dental labs that produce dentures with a similar exciting opportunity in Europe. We launched our NextDent 300 denture printing system in late 2025, following FDA clearance and secured full EU MDR approval for sale into Europe in the second quarter of this year. Since that time, acceptance by dentists has been strong, driven by the beauty of the product, its durability and the comfort patients experience from the first fitting. These clinical benefits create demand while the efficiency of the digital production process and shorter lead times translate that demand from dental labs into revenue for 3D systems. The result has been a rapid rise in demand each quarter since launch, as shown in the production chart on Slide 9. While the market is highly fragmented with more than 8,000 labs across these regions, revenue is concentrated in the top 300 to 400 manufacturers. Based on our current outlook, we expect to have printers installed in more than 100 of these dental labs by year-end with a growing number of multiunit deployments to follow. Importantly, once operational, even these initial printers alone will generate a recurring revenue stream of more than $2 million annually at highly accretive gross margins. While encouraging, these sales represent less than 2% penetration of the overall denture market in the U.S. and Europe, meaning the future growth potential is very strong. As an example of customer receptiveness to this technology, one of our earliest lab customers purchased their first printer late last year and is already installed and is running a sixth unit, tripling their historic capacity. We now see others following suit. For early adopters, this creates a clear path to market share gains through lower production costs and faster turnaround times. Looking ahead, with regulatory approvals expected in Mexico, South America and several Asian countries over the next year, combined with the strong acceptance rates we're seeing in the U.S. and Europe, we expect our denture-related revenue to become one of the largest and most profitable streams for the company in the years ahead. Moving to Slide 10. We come to one of the most exciting growth opportunities in our industrial business, second only to aerospace and defense, data center infrastructure, a market we have been building for several years. This market spans several high-value applications, including semiconductor manufacturing equipment, advanced GPU cooling systems and emerging energy generation technologies, including both nuclear fission and fusion-related applications. We participate in these markets in 2 complementary ways by supplying precision metal printed parts directly to customers and by providing printers that enable them to manufacture these components themselves. In the second quarter, our semiconductor and high-performance computing business grew almost 30% year-over-year, building on strong first half momentum. Growth was driven primarily by demand for metal printed parts, while the pipeline for new printer systems also remains healthy. This distinction is very important. While printer sales expand our installed base, the growing volume of parts we manufacture for these customers is a key lever for improving the gross margin profile of our metal printing business over time. As production volumes scale and we continue to optimize our manufacturing operations, we expect parts manufacturing to become an increasingly meaningful contributor to both revenue and profitability. Over time, many of these customers are also natural candidates to adopt our metal printing systems as their volumes increase. Looking ahead, the unprecedented level of capital investment flowing into data center infrastructure continues to create strong demand for complex, high-performance metal components that are difficult or uneconomical to produce with traditional methods. Direct metal printing opens new design opportunities that will play an important role in future chip manufacturing capability and cost. We believe we are well positioned to capture a growing share of this market through both our parts manufacturing capabilities and our advanced printer platforms. From an energy perspective, we're already seeing demand related to large land-based turbine manufacturing, which benefits from both our polymer systems used in investment casting and our direct metal printing systems. Given the significant electrical demands for data centers and the growing need for hyperscalers to secure their own power, there is increasing interest in metal 3D printing for next-generation nuclear applications, including small data center-focused designs as well as fusion-related components that require materials capable of withstanding extreme temperatures and radiation. These are areas where traditional manufacturing is often difficult and very costly. Turning to Slide 11. I want to highlight the resources we're drawing upon to expand our energy-related activities. As many of you know, 3D Systems is headquartered in South Carolina, and we're fortunate to have one of the leading organizations in nuclear research as our neighbor, Savannah River National Laboratory, or SRNL, as it's known. For decades, SRNL has conducted critical research and development in support of nuclear energy, spanning nuclear materials and component processing to system applications relevant to both national security and commercial power generation. I'm pleased to announce that we've executed a cooperative research and development agreement or CRADA as they're known, with SRNL. This partnership will enable our organizations to collaborate on the development of new materials for the extreme environments of nuclear fission and fusion reactors on component design and manufacturing and on the use of AI to optimize processing and performance. We believe direct metal 3D printing will play an essential role in developing and scaling these technologies. Of particular note, this collaboration will leverage the Advanced Manufacturing Collaborative, a 63,000 square foot research and innovation center operated by SRNL on the University of South Carolina Aiken campus, which opened in 2025. As the only Department of Energy facility of its kind located on a university campus in South Carolina, the AMC is uniquely positioned to support both R&D and the training of engineers in advanced manufacturing processes, including metal 3D printing. In short, this partnership provides a clear pathway from collaborative research on nuclear energy applications to commercial scale industrial opportunities in the United States. We view it as an important element of our longer-term growth strategy in advanced energy markets. Moving to Slide 12. I'd like to take a few minutes to describe how our direct metal printing technology is differentiated, an area that represents a major growth vector for the company. Our metal printing systems were originally developed to manufacture critical components from highly reactive materials used for medical applications. These systems were designed to meet the highest quality standards required by the FDA and European regulatory bodies. Central to that capability is exceptional environmental control during the printing process, which minimizes reaction with oxygen. As a result, our systems rank among the best in the world at printing titanium, a lightweight, strong, temperature-resistant and biocompatible material as well as cobalt chrome alloys used in joint replacement. Today, we maintain a large active installed base of metal printers with leading medical device OEMs and their contract manufacturers, along with our own fleet of metal printers in the U.S. and Europe, producing parts daily for implantable applications. Building on this foundation, over the last several years, we've expanded our metal focus into aerospace and defense, data center infrastructure and advanced energy applications. As demand has grown for components made from nickel-based super alloys and refractory metals such as tungsten, molybdenum, niobium, materials used in extreme temperature and stress environments, we've engaged with leading OEMs on these applications. These high-performance materials are extremely difficult to fabricate with traditional methods. Direct metal printing not only enables conventional designs to be manufactured economically, but also opens the door to new configurations that can improve system performance and reduce cost. The commercial results are now clear. Sales of our metal printers are growing at record rates. In fact, we sold more metal printers in the first half of this year than in all of 2025 and demand continues to rise. Looking ahead, with the support of the U.S. government, we're building on this strong foundation through the development of a large-scale metal printing system capable of manufacturing components over 1 meter in size at quality levels and production rates that we expect to lead the industry. Importantly, this system is being designed and will be manufactured entirely in the United States, including the critical application development work required for targeted markets. Finally, let's turn to Slide 13, and I'll conclude my comments on the quarter with a brief summary of our metal parts expansion plans. Demand for direct metal printed parts is rising rapidly. This is not only driving sales of our printer systems, but increasingly, our customers are asking us to supply finished metal parts. These are typically very challenging production parts that combine extreme performance requirements with highly advanced materials and therefore, generally command a higher ASP. Given our application development work with OEMs and our ability to ultimately provide printers for their own use, this is a natural request by our customers. By fulfilling it, we can effectively bridge a customer from concept demonstration to full-scale production without the need to qualify new print processes or suppliers along the way. Depending on the demand profile, this bridge period can last for months to years. In response to this growing demand, we're expanding our part production facilities in both Leuven, Belgium and Littleton, Colorado. Leuven primarily supports European customers, while Littleton, a suburb of Denver, focuses largely on U.S. customers and has the capability to support U.S. defense work. To put numbers to this expansion, today, we have roughly 220,000 square feet of space dedicated to metal printing, covering design, manufacture, application development and support. We're adding approximately 50,000 square feet of parts production capacity in Littleton, bringing our total to over 270,000 square feet with the grand opening of this expansion targeted for the fall. From a printer standpoint, we currently have 77 metal printers in production and an additional 42 polymer printers used primarily in support of our medtech business. This expansion of both our U.S. and European metal parts production allows us to leverage the rigorous quality infrastructure that is essential to our medical business. The ability to print metal parts at the highest quality levels is at the heart of our growing metal part business. You'll hear more about this expansion in the months ahead. Before I turn the call over to Phyllis, I want to briefly address the announcement we made this morning regarding my planned transition. Today's quarterly earnings call is roughly my 100th as a public company CEO. After more than 6 years leading 3D Systems, I've developed a deep appreciation for this company, for my colleagues, for our mission and for the customers that we serve. I'm also grateful for the unwavering support of our shareholders, particularly through the challenging industry conditions we've experienced over the last 2 years. While the succession process is just getting underway, in the months ahead, I'll be concluding my service as CEO. I remain fully committed to supporting a smooth transition and we'll stay closely engaged with the Board and leadership team during this period to ensure we stay on track with the positive momentum that we're experiencing. The strategic priorities we've discussed today, focusing on our 4 key markets, expanding our metal printing and parts capabilities and driving profitable growth remain the right path forward for this company. I'm confident in the strong foundation we've now built and pleased with the progress we're making as we emerge from the industry recession. I believe there are bright days ahead. And with that, I'll turn the call over to Phyllis for a more detailed review of our second quarter and first half financial results. Phyllis?

Thank you, Jeff, and good morning, everyone. Before I begin, Jeff, I want to thank you for your leadership over the past 6 years. Through a period of industry challenges and considerable change, the company made notable progress in strengthening its operational foundation and streamlining its cost structure while also refreshing the product portfolio and sharpening our focus on 4 important growth markets. These efforts have established a solid foundation, enabling us to build on our strategy moving forward. We are grateful for your continued service to the company during the transition. Thank you very much, Jeff. With that, let's now turn to our financial presentation. Before beginning our review, I'd like to remind you that we completed the divestiture of our legacy software businesses during 2025. As such, the comparisons I will reference today are presented on an adjusted basis, excluding the impact of these divestitures to provide a more meaningful apples-to-apples view of our operating performance across periods. With that, let's now begin on Slide 17. As highlighted earlier on the call, our second quarter results reflect continued progress against our strategic priorities. Before I walk through the financial results in more detail, let me start with some highlights from the quarter. Second quarter revenue increased year-over-year, driven by strong demand across our target markets and increasing sales of our new polymer and metal printer platforms. Adjusted EBITDA also improved notably from the prior year period as a result of higher revenue, disciplined cost management and ongoing operational efficiencies. Turning to our second quarter revenue performance. Revenue was $94.6 million, an increase of 1.4% year-over-year. This increase was driven by continued momentum in hardware printer sales, which grew over 40% from the prior year period and more than 20% sequentially as demand across several of our printer platforms continued to strengthen. Performance across our key strategic markets remained strong in the quarter as medtech, aerospace and defense and data center infrastructure each delivered double-digit year-over-year growth. Within the medtech and aerospace and defense markets, we had strong demand for our DMP 350 metal printers, along with healthy sales of our SLA 825 polymer printer. Both of these platforms meaningfully contributed to revenue performance during the quarter. In data center infrastructure, revenue grew more than 20% year-over-year as a result of increasing demand for metal parts used in critical airflow and thermal management components for semiconductor manufacturing equipment. Moving now to Slide 18 to cover our business segments. Healthcare Solutions remained our largest segment in the quarter with revenue of $48.1 million, up 6.8% from the prior year period. Healthcare growth was driven by continued strength in our medtech market. Demand for metal printers used by OEMs to produce orthopedic medical implants meaningfully increased during the quarter and Personalized Healthcare Solutions, our PHS business, benefited from growth in surgical planning and trauma applications. Dental revenue also increased in the quarter with steady demand for dental material sales and continued adoption of our NextDent 300 denture printer across both the U.S. and Europe. Turning to our Industrial segment. Revenue for the second quarter was $46.5 million, down 3.7% from the prior year period and up 2.4% sequentially. The decline primarily reflected revenue that did not carry forward following the closure of a noncore product offering last year as well as lower services revenue on our legacy printer installed base. As we continue to see momentum in sales of our updated printer platforms, we believe the ongoing refresh of our installed base should position us to drive future recurring products and services revenue. Looking across our industrial markets, aerospace and defense remained our largest market with space and defense applications driving sales in the quarter. We also saw healthy year-over-year growth in data center infrastructure, resulting from increased demand for parts manufacturing, along with solid growth in materials and services revenue within automotive and motorsports. Turning to Slide 19 to review gross margin. Second quarter non-GAAP gross margin was 36.7%. Gross margin performance in the quarter reflected offsetting factors, including a higher mix of hardware printer sales, less favorable materials mix and the comparison to a large regenerative medicine milestone recognized in the prior year period. These headwinds were partially offset by the benefits of prior cost reduction actions and the recognition of $2.6 million in tariff refunds during the quarter. As we look to the second half of the year, we expect continued demand for printer hardware, which should drive a growing base for future materials and services revenue. Turning to Slide 20. We continue to demonstrate strong cost management and operational efficiencies through the first half of 2026. In the second quarter, non-GAAP operating expenses were $39.5 million, a decrease of 11% from the prior year period. Sequentially, operating expenses increased by $2.9 million, primarily due to normal quarterly timing of expenses and an isolated bad debt reserve. Additionally, this quarter, we completed our 6-quarter cost reduction initiative, which included actions to optimize our facilities footprint, streamline our operating model and reduce ongoing operating costs. These actions have now delivered a little more than $60 million of annualized savings, contributing meaningfully to the improvement in our profitability metrics. While this initiative has concluded, we remain focused on identifying additional opportunities to further optimize our operations. These actions have strengthened our cost structure and reinforce our disciplined approach to expense management, enabling us to selectively increase investments in R&D and capital to support our strategic priorities. Now moving to Slide 21. Second quarter adjusted EBITDA was negative $800,000, an improvement of $3.9 million from the prior year period. This was primarily driven by the benefits of our previous cost reduction actions and the recovery of tariff refunds in the quarter and was partially offset by the isolated bad debt reserve recognized in the period. Turning to earnings per share. Second quarter non-GAAP EPS was negative $0.04, an improvement of $0.02 per share compared to the prior year period. While there is still work ahead, our consistent performance over the past several quarters demonstrates that the actions we have taken are delivering measurable financial improvement. We believe these efforts are strengthening the foundation of the business and positioning the company for long-term profitable growth. Turning to Slide 22 for a summary of our balance sheet. During the second quarter, we completed an equity offering with net proceeds just over $53 million, strengthening our liquidity position and providing flexibility to support ongoing business operations and strategic investments in our priority growth markets. We believe target investments in talent, facilities expansion, printers and equipment and critical tools and technology will enhance our ability to capitalize on key markets that are accelerating the adoption of additive manufacturing. Moving to our cash position for the quarter. We ended the second quarter with $129 million in cash, cash equivalents and restricted cash. Total debt outstanding was $96 million, with $3.9 million coming due in the fourth quarter of 2026 and the remaining $92 million maturing in 2030. Now turning to Slide 23. As we conclude our detailed review of the second quarter, I'd like to briefly summarize our year-to-date performance through the first half of 2026. Looking at the first 6 months of the year provides a more comprehensive view of the performance of the business by helping to normalize the impact of typical quarter-to-quarter fluctuations related to the timing of customer purchases. Turning to our first half results. Revenue increased 6% compared to the prior year period, driven by strong performance across our 4 priority markets, each of which delivered more than 20% growth year-over-year. Within our business segments, Healthcare grew 14%, while Industrial revenue declined 1% compared to the prior year period. Revenue growth in Healthcare was driven by strong demand across the medtech business, including growth in Personalized Health Solutions, higher DMP printer sales and continued strength in orthopedic parts demand, along with double-digit growth in our Dental business for the first half. Industrial revenue performance was primarily impacted by softer demand in our consumer-facing and general manufacturing markets, the end markets most sensitive to pricing and macroeconomic conditions. These headwinds were mainly offset by strong growth in aerospace and defense and automotive during the first half of the year. Moving to adjusted EBITDA. We generated positive adjusted EBITDA of $1.3 million in the first half of 2026. This performance reflects solid revenue growth in the half, meaningful benefits from our completed cost reduction actions and continued discipline in managing operating expenses. While there is still work to be done to carry forward this momentum, we believe these results demonstrate the progress we are making toward our long-term profitability objectives. Turning to Slide 24 to conclude with our Q3 outlook. As we look to the third quarter, we remain encouraged by the positive trends we see across the business. We anticipate ongoing strength within our key markets, supported by growth in both printer hardware systems and parts sales. We also remain confident in the continuing adoption of our new denture platform and ongoing growth of our PHS business. Reflecting on our recent performance, ongoing operating discipline and expected product sales mix trend, we are providing the following outlook for the third quarter of 2026. Revenue in the range of $96 million to $99 million and adjusted EBITDA in the range of negative $3 million to negative $1 million. In summary, we believe our results in the first half of the year, combined with the breadth of our metal and polymer portfolio to address the needs of our growth markets, position us well for the third quarter. This now concludes the review and discussion of our second quarter and first half financial results. With that, I will now open the line for questions. Operator?

[Operator Instructions] Our first question today is coming from James Ricchiuti from Needham & Company.

First off, Jeff, congratulations, and I wish you the best.

Thank you, Jim, very much. I appreciate that coming from you. I really appreciate it.

And it looks like some nice progress in the quarter. And a couple of things. First off, how are you thinking about the NextDent deployment looking out to 2027, just based on what you're seeing in the market today?

Jim, I would tell you, I've been thrilled with the receptivity. We're starting -- we've been out there long enough now to really start getting some feedback from the end user, the patients, if you will, and the dentists. And I knew it was an attractive product and the performance was good. What I've been particularly pleased with, Jim, is the feedback we get on the comfort of fit the first time. So from a patient standpoint, they don't have to come back multiple times to have them adjusted, which you do with conventional dentures quite a lot. And for the dentist, what that translates into is productivity. They can see more paying patients a day by doing that. So all the stars aligned for dentures right now. I am thrilled with the uptake. Now it's really about marketing to make sure more and more dental offices know of the availability of the product, and then our direct sales activity to dental labs. And there are a lot of them, Jim. And that's good and bad. I mean, it's nice to have a distributed customer base, so you don't have customer concentration. But for a smaller company like ours, we also have to have really good direct salespeople and channel partners to get out there and touch those labs. Even when you concentrate it down, there's about 8,000 total labs between the U.S. and Europe. You focus it down, there are about -- there are a few hundred that really drive a lot of revenue, but that's still a large number. So what I was really pleased about, Jim, is that we've got -- we're now in about 100 of those labs with our first printers. Some of them are buying second and third printers. That's the start of really building momentum. So I think it will take a couple of years to really build. But if you look at -- we've already revised our Q3 and Q4 production plan up twice this year. And we're starting to be a little -- to be frankly, Jim, to be a little bit rate limited by electrical components that are going into data centers. So we're starting to -- we are starting to have to kind of buy ahead, make sure our supply chain is able to support our growth in the denture market. But I am really pleased. I see no impediments. It's all a matter now of marketing and sales and really getting the message out about it. And on the heels of the products we've already launched, we've got already a next-generation product in the pipeline we're working on to make it even faster and better. So I'm thrilled. Just opening up the U.S. and Europe, Jim, could potentially bring a revenue stream that's several times the revenue stream we've had for teeth straightening for the aligner product. And the materials are regulated. They're FDA and EU MDR approved. So when you sell a printer, customers really are incentivized, if you will, by the regulatory environment to use your materials. So I am thrilled with all aspects of that, Jim, and the quality of what we're shipping is outstanding. I think by '27 and '28, you'll see this revenue stream growing significantly. We've got other exciting growth markets, so it's impossible to say what will be the single biggest in our company. But I would tell you, dental in total, I could see being that and dentures, I believe, in a couple of years could be the leader in that whole parade. So I'm really excited. '27 will be a good year. I think '28, '29, there's many good years to follow, Jim.

Got it. That's great color. Phyllis, maybe a question for you. I'm wondering how we should be thinking about gross margins and OpEx in the back half of the year. If you're able to give us some color on where you see margin trends.

Sure, Jim. So just looking at gross margins, Jeff mentioned in his script that we were going to be printer heavy in the back half of the year, particularly in Q4, that's always a very printer heavy quarter given CapEx spending that occurs near the end of a calendar fiscal year. On the OpEx side, so I'd say margins will be, I'd say, slightly impacted by that printer mix. So I would sort of factor that in as you're looking forward in the second half. As it relates to OpEx, I think we've done a really good job over the first 2 quarters. I don't see that momentum changing. I think there's stability now in our OpEx performance. So looking in the back half of the year, I would expect what you saw in the first half of the year to be pretty similar to the back half.

Jim, before you drop off, I just want to personally thank you. You have followed this company. I've known you a long time, you followed this company extremely well and our entire industry. Really appreciate the hard work you've done and the research you put out on us and others in this industry. Thank you very, very much for the support. It's obviously a bit of an emotional day for me, and I just want to say thank you personally very much.

Our next question is coming from Greg Palm from Craig-Hallum. [Operator Instructions]

Yes. Thanks, Jeff. Well, I think you mentioned almost 100 quarterly calls. That's a pretty impressive feat that probably puts you in rare territory. So yes, I'd like to just offer my congratulations on a pretty amazing career as well.

Thank you, Greg. I really appreciate that.

So let's maybe start with that. The timing is a little bit interesting given, frankly, a lot of hard work over the last few years that's now, I think, put the company in a pretty interesting position to accelerate growth, profitability. So I guess the question is, why now? Why does the timing make sense? And just to be clear, has the search process already started? I just wonder how long this has been going on behind the scenes.

No, it's just really getting underway, Greg. So that's -- it will -- it could be a protracted period, Greg. I'm certainly not leaving right away. This could take many months to play out. So it's just getting underway. Yes, I will say in terms of timing, Greg, it's a great question. I -- in addition to being the CEO, I've been on public company boards for cumulatively for 35 years and through several -- many different boards and public company boards and CEO transitions are always tricky. That's always an art. Many companies wait until a company has a real problem. There's an issue, and they're forced to make changes and make them as quickly as they can. I think 3D Systems now, we're in an enviable position. We have made it through a really difficult period in this industry, where we had to cut an enormous amount of cost out of the business while maintaining our R&D portfolio spend in order to be ready for this resurgence now out of the recession that I think you're going to see going forward. So the timing may look a little interesting from the outside, but I would tell you, we've got the company well positioned now. When you go to look for a CEO, you can say to somebody, look, the hard work is done of leaning out the company, getting the portfolio refreshed and focusing on the core markets, we're ready to rock. And we've got cash on the balance sheet to do it. That's a really attractive, if you will, advertisement for a CEO to come in that has maybe a 10-year runway. I grew up at GE, where when you look for a CEO, it was a -- you wanted somebody with a decade runway, okay? I've been at this for some time. It's not like I want to go sit on a beach somewhere, but it is an elegant time to hand to somebody and say, you've got a run ahead of you now that's very positive. So I think it's a good time to do this type of thing. It may look a little different because it's not being driven by anything, but it is being driven more by an opportunity of the future to keep the momentum going in this company for an extended period of time because our products tend to last 10 years or more. So the decisions that you make, they take several years to see them play out, and you want somebody in the chair that's going to see it through that whole process. So that's what I would say is the timing. It's a positive thing for the future. I'll be here until we get a very good person in this seat to carry the ball forward. I'm committed. I love what we do. I love this company, frankly, I love our people and particularly our customers and our mission. I will ensure that to the best of my ability that we get somebody that is credible worthy of this position going forward and can really carry the ball to new heights. So that's the simple kind of long-winded explanation, Greg, for you. Okay?

Yes. No, I appreciate the thoughts. I wanted to maybe shift gears and talk about some of the highlights. So you noted, I think what you said was a record industrial polymer printer order or at least I think, sort of strongest order activity since 2014. Can you quantify that or give us some sense of what that represents in terms of the number of shipments? And were some of those shipped? Are those from future delivery? I just wanted to be clear. I think you said that was casting for reusable rockets, but just wanted to confirm.

Yes. You certainly got the market right, Greg. And in terms of the exact details of the order, I don't want to get to an order level of detail, but I will tell you, it spans multiple quarters. It's a very large order for printers that are critical to the production of reusable rockets. And I just couldn't be happier about it. And when we accepted that order, I'd tell you, I was not only happy for the company, I was happy for our nation and the world. I think the revolution in space travel now is amazing. The cost they brought out of doing that is incredible. And 3D printing is really, really showing its potential to change the manufacturing environment for a company that will embrace it and use it. And I love visiting that customer because I see every day how they're embracing new manufacturing technology, not only 3D printing, but other technologies that are really evolutions of our traditional industrial base and you say, "Wow, you guys are plowing new ground that is amazing to me." I look up in the sky at night and sometimes you can see the constellation of satellites that are up there, all based on their use of this kind of technology. So I can talk on and on about it. I love it. It spans multiple quarters. We did do some shipments in Q2. They wanted immediate delivery as much as we could. And we've got much more ahead of us. So if we play it right, I mean, if we do a good job for them, it can be a revenue stream for many, many years to come. And because it's a polymer-based product, you'll have consumable access to material sales that carry a high gross margin. So love the application. It's a model for us to follow in all of our core growth markets now, okay? And that's why I think you'll see a nice resurgence of industrial 3D printing in key markets now, Greg.

Yes. Okay. That makes more sense because I was going to segue into that and ask about Q3 because I'm not sure when the last time you actually grew sequentially from Q2 to Q3, and it's mid-single digits at the midpoint. So it sounds like maybe it's a combination of this and some of the other stuff. But...

Well, the encouraging thing, Greg, is, yes, this order was a really nice cornerstone to build on. But we see strength. I'll ask Phyllis to comment on here in a second on -- we see strength. We keep talking about these 4 key growth markets, 2 in healthcare, 2 in industrial. They're all coming back, and they're doing well. Now there -- quarter-by-quarter, there'll still be noise, but they are all doing well. And look, we still have exposure to other markets and stuff. That's why the whole company is not growing at this rate yet. But if you look at our 4 core growth markets, and they're all firing now on all cylinders. And I think you'll see that going forward a lot. Now it starts with printer sales. So we're selling a lot of printers into the field. Material sales on the polymer side will follow and metal parts sales will follow on the metal side. Phyllis, maybe you could comment for Greg on the core growth markets.

Yes. I think what I'm most excited about is not just being it concentrated in any one category. So Greg, we're seeing it again across printers, materials, parts, even within our healthcare services like PHS, there's an expectation that there is continued momentum from quarter-to-quarter. Oftentimes, we can be a little lumpy just depending on mix, but I think we've got a good broad sort of growth story coming into Q3, which is why we set the range where we did. So I'm very happy about that.

Yes. Okay. And I guess just last one in light of this positive commentary, I mean, across a whole bunch of end markets and product lines, and I'm cognizant of the fact that you only guide 1 quarter out, but I'm having a hard time not believing that this is kind of a growth company again, and you can maybe get back to double-digit growth. I mean, do you have line of sight in returning to double-digit growth, whether that's next year, '28?

Greg, yes, you can certainly extrapolate that direction. Given the last 2 years of severe headwinds from this recession, our industry has gone through, I hate to get it too far out in time because I just don't know what's going to go on in the world. But yes, I agree with you. That's the trend. We've taken the conservative approach now to just guide a quarter out, one foot after another. That's where we're going. We try to give you color on the core markets so that we don't just hang our hat on a onetime event, like one big order, try to give you color on the core markets. And our 4 key growth markets are, I believe, long-term growth markets. They're looking really solid for years to come, I believe. So I'm optimistic. I'm positive about the trajectory. I don't want us to get out over our skis like so many times this industry has done. I just want to keep delivering on solid growth every quarter and improving profitability. So that's why we're guiding Q3 and not the full year or '27, okay?

[Operator Instructions] Our next question is coming from Kieran McCabe from Cantor.

I want to thank Jeff for his service to the company. I just start up on this industry a few months when you joined 3D Systems. So I enjoy learning the industry as you're CEO of the company. So I want to send my congratulations. My question...

Thank you, Kieran. Kieran, thank you very much for those kind comments. And please pass along my thanks to Troy as well, Troy Jensen, who has done an excellent job, your colleague there at Cantor has done an excellent job working not only with me and 3D Systems, but this entire industry particularly through this difficult period in the last couple of years, you guys have been there and done a terrific job, Kieran. So thank you.

Great. Well, I'll pass it on and we appreciate it. I guess my question is maybe kind of a follow-up to the previous one, but maybe can you -- I guess, in industrial, you said some of the end markets are price sensitive, were a little bit weaker and maybe you can provide a little bit color on like aligners sort of are you seeing better visibility in those markets that may be more cycle, more price sensitive? Maybe are you kind of seeing some light at the end of the tunnel in those kind of markets that are maybe more tied to the economy?

Yes, Kieran. So I would tell you, dental as a whole has been a good story. And historically, it's been highly tied to the aligner market. And we've written the ups and downs of that market. That market now seen from everything I can see publicly and stuff, it seems to have stabilized at more modest growth rates but continue to be a growth market. I think that's a great foundational business. I do not put that in the category of severe external competition and things. I think we've got a really deep relationship and foundation there. When you think about other markets that remain weak for us, it's on the industrial side of the business, outside of -- it's easier to say what's outside of aerospace and defense and data center infrastructure. So the more consumer-facing markets that we have are like the service bureaus that support consumer-oriented business. The jewelry business happens to be not only a consumer-facing business, but also deeply embedded in the Middle East. So those kind of markets remain challenging. And that's why on the industrial side, you see that as pretty much an offset to the strength in the high-growth markets. Over time, those high-growth markets are going to become dominant. Aerospace and defense is already our biggest industrial segment, and it's got great legs to it. Data center infrastructure, I think you're going to see the exact same thing. It's going to be a big market for us and a very good one. And then part making to support those markets is going to be very big. So over time, we'll get less exposed to consumer-facing markets. It is -- those are not markets that we're looking to make tremendous investments in for growth. They're certainly more competitive, particularly with Chinese products now. So we look more and more, they're good. They're foundational, but we're looking more and more to these high-growth markets for our future investment, Kieran, okay?

Right. And then you did have a very strong improvement in adjusted EBITDA and nearly breakeven. You're guiding to a small loss in the third quarter. And it seems like things are improving and have done $60 million in run rate cost reduction. I kind of -- I guess, maybe what do you kind of view as the levers to get you over that bump to positive EBITDA and kind of the timing? I know you're kind of conservative on the outlook, but you seem to be almost there and just kind of a nudge to get to the positive side.

It's like you're sitting at the table, you could smell dinner, but it's not quite on the table yet. So no, you're right. It's really tied -- no, it's really tied to continued volume growth, and we're getting that now in printers. It's great to have. We'll get volume efficiencies with that. We'll get gross margins up based on volume efficiencies there and stuff. But the real payoff is going to come on material pull-through when those -- on the polymer side, when those printers are installed and really running, we're going to get material pull-through that almost assuredly always follows. I mean in many cases, it's a regulated environment and it has to follow. In other cases, our materials are just very attractive and are strongly preferred for our printers. So you'll get material pull-through, which is important for our gross margins. And on the metal side of things, we've got what's emerging is this, I think, a relatively unique model where we now bridge customers from initial application development through part production through printer sales. And it's the rise of part production as a part of that model that's going to also drive our gross margins. So the key to profitability for us is getting our gross margins up. The linkage there is to consumables on the polymer side and metal parts on the metal side. And I think that naturally follows from the growth we're seeing on printers right now. So I'm thrilled with the outlook. I think it's rock solid in a very volatile world. We're in the markets you'd like to be in for growth and a bit of insulation from some of the day-to-day volatility, if you will.

And my final question, kind of personal interest in it, but it's on the data center infrastructure, the slide you had powering the data center and nuclear, are you working a lot with like the hyperscalers and data centers for powering more behind the meter at the site? Or are you also working with large utilities and sort of the grid and generation off-site?

No. So there's -- we're working primarily with the traditional -- first of all, the traditional OEMs. You've got people like GE Vernova, Siemens, others that are in the business of manufacturing power generation equipment using traditional means like natural gas-fired gas turbines. Then you've got now these hyperscalers that have to basically bring their own energy, Kieran. I mean it's too much for the grid to handle easily, so they have to bring their own power. So I'm getting called into more and more meetings about things like small nuclear reactors for data centers. And it's -- after not being in the nuclear business for a few decades as a country, I think you'll see a resurgence in nuclear power, not necessarily the big power plants owned by utilities as much. Those take a long time to build many, you measured it in decades sometimes. You'll see nimble smaller nuclear plants, I believe, powering big data centers. And we're in direct discussions right now with the OEMs, the hyperscalers that have to buy those products and then their key suppliers that are going to supply them, okay? They're not going to -- hyperscalers aren't going to manufacture the energy generally. They're going to rely on key suppliers to produce it. Those are the folks that we're getting down to now. And Kieran, I'd just point out this Savannah River National Lab tie-in that we have now in South Carolina, they do marvelous work on nuclear power and fusion power, which is right on the cusp of being commercially viable. The materials they use are custom made for 3D printing, if you will. They are high-temperature difficult materials, very hard to manufacture through traditional means and they're very expensive parts. So they're ideal for 3D printing where you can bring the cost down and you can enhance the design capability of those components. So that's what we're doing on the fundamental side, working with SRNL on -- they're leveraging their R&D. We're putting that technology into our printers now, and we're working with the hyperscalers to apply that technology. So that's where we're headed. I wanted to mention it because it's a future thing, but I think it's a really big deal, Kieran. So when you look out a few years for us, I think energy will warrant its own discussion. It will have its own revenue stream and profit stream from that, okay?

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Kevin, you've been our operator on these calls, I think, since I arrived at this company over 6 years ago. You've done a marvelous job for us. And in my mind, you're not only a hero for seeing us through these calls, but you represent hundreds of people that help us do what we do every day and communicate with the outside world. So I want to thank you personally and for all the folks that largely go unsung in getting information out on the company and helping us deliver every day. So thank you, my friend, for helping us through these calls, and I wish you the very best as well. So with that, let me wrap up the call. Again, I will be here for months to come yet, most probably. I may see you on another earnings call. Thank you all for tuning in today. Thank you for supporting our company, and we look forward to sharing our continuing results with you in the -- after the third quarter.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.