Good afternoon and welcome to the 3D Systems' Conference Call and Audio Webcast to Discuss the Results of the Third Quarter of 2018. My name is Latanya and I will facilitate the audio portion of today'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. At this time, I would like to turn the conference over to Stacey Witten, Vice President of Investor Relations for 3D Systems. Please go ahead..

Good afternoon and welcome to 3D Systems' conference call. I am Stacey Witten and with me on the call are Vyomesh Joshi, our President and Chief Executive Officer; John McMullen, Executive Vice President and Chief Financial Officer; and Andy Johnson, Chief Legal Officer.

The webcast portion of this call contains a slide presentation that we will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website.

Participants who would like to ask questions at the end of the session related to matters discussed in this conference call should call in using the phone numbers provided on this slide and in the press release that we issued today.

For those who've accessed the streaming portion of the webcast, please be aware that there may be a few-second delay and you'll not be able to post questions via the Web. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on the slide.

Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent Annual Report on Form 10-K. During this call, we will discuss certain non-GAAP financial measures.

In our press release and slides accompanying the 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 to comparable GAAP measures.

Finally, unless otherwise stated, all comparisons in this call will be against the results for the comparable period of 2017. Now, I'm pleased to turn the call over to Vyomesh Joshi, our CEO.

VJ?.

Thanks, Stacey. Good afternoon, everyone. We are pleased with our continued strong growth in printer units and printer revenue across both metals and plastics, with balanced execution across all regions. Our new products have been very well received, and we continue to ramp sales and production of these new solutions.

We are seeing early returns on the investments we have made and continue to deliver growth across many revenue drivers. In the third quarter, we reported printer revenue growth of 17% on a 93% increase in printer unit sales. Materials revenue growth of 2%, software revenue grew 8% and healthcare solution revenue grew 14%.

While our actions and investments in go-to-market are not done, we have made significant progress to drive growth and improve execution worldwide, and we are starting to see cost structure improvements as a result of the actions we are taking. In the third quarter, we began to ramp production and sales of our new products.

While it is still early in commercial shipments, we are very pleased with the reception and performance of the SLS 6100, FabPro 1000, NextDent 5100, Standalone Figure 4 and MJP 2500 investment casting. During the third quarter, we also debuted our new DMP Factory 500 at IMTS 2018, our first solution from our partnership with GF Machining Solutions.

The DMP Factory 500 is now available to order with the limited shipments plan to begin this year. We are now shipping the ProX DMP 350, the next generation of the ProX DMP 320. The ProX DMP 320 has been a very successful product for us and customer demand in the third quarter exceeded our manufacturing capacity during the quarter.

We are excited to continue to build on the success of our metals platform with ongoing innovation, design for advanced manufacturing including materials expansion, and software and workflow capabilities.

Additionally, our partnership with GF is expanding our capabilities and together, we plan to provide automation and enhanced integration with traditional manufacturing. With that, I would like to provide an overview of the third quarter before John provides more detail on financial results.

During the third quarter, total revenue increased 8% to $164.5 million, including continued strong growth in printer revenue of 17% on a 93% increase in unit sales and double-digit growth in healthcare. Gross profit margin in the third quarter of 2018 was 47.3%.

We are beginning to see results from our actions we are taking to improve our cost structure, and operating expenses decreased in the third quarter. For the third quarter of 2018, we reported non-GAAP earnings of $0.02 per share and a GAAP loss of $0.10 per share.

Now, let me turn it over to John to discuss our third quarter 2018 financial performance in more detail.

John?.

Thanks, VJ. Good afternoon, everyone. For the third quarter, we reported revenue of $164.5 million, an increase of 8% compared to the third quarter 2017 despite a 1% negative impact of foreign currency. GAAP gross profit margin was 47.3% compared to 38.3% in the third quarter of 2017. GAAP operating expenses decreased 2% to $88.8 million.

We reported a GAAP loss of $0.10 per share in the third quarter of 2018 compared to a loss of $0.34 per share in 2017. We reported non-GAAP earnings of $0.02 per share or $2.4 million in the third quarter of 2018 compared to a non-GAAP loss of $0.20 per share or $22.6 million in the third quarter 2017.

We are pleased with our revenue growth across many categories of the business in the third quarter, in particular the continued growth in printers revenue which resulted from growth across multiple platforms in all regions.

Printer revenue increased 17% to $34.5 million on a 93% increase in printer unit sales with strong growth in both production and professional units. As we have discussed, printer unit sales, revenue mix and overall average ASPs will likely continue to fluctuate, particularly as we launch and ramp products at a very wide range of prices.

We believe the printer unit placements we are making now will help fuel our annuity-based business model over the long term. Materials revenue increased 2% to $40.3 million in the third quarter.

A lag time between printer placements and scaling materials utilization is very typical and, over time, we expect stronger growth in materials as we continue to place highly productive units quarter-after-quarter. Healthcare revenue increased 14% to $53.1 million with growth across all categories.

We continue to be pleased with the overall demand trends for healthcare. NextDent 5100 printers began shipping, and we are pleased with the results thus far and expect continued ramp over time in sales of these low-cost, high-productivity dental solutions. Software increased 8% to $22.9 million in the third quarter.

While quarterly performance may fluctuate, we continue to expect growth from this category long term. On-demand manufacturing revenue decreased 3% to $26.3 million in the quarter.

We believe our investments in facilities, technology, customer experience, demand generation and our enhanced sales approach have resulted in improvements in our on-demand business.

However, during the third quarter, we took actions to change our approach and processes related to global sourcing of orders and, as a result, put significant negative pressure on on-demand sales during the quarter which we believe remain a negative impact on sales in the fourth quarter of 2018 as well.

We reported GAAP gross profit margin of 47.3% in the third quarter of 2018 as cost improvements from ongoing supply chain cost reduction initiatives were offset by the impact of sales mix and production and actions related to ramping new products.

In the third quarter of last year, gross profit margin was 38.3%, inclusive of $12.9 million of charges related to portfolio realignment and product discontinuations.

We continue to drive supply chain optimization, manufacturing efficiencies, and process improvements and therefore continue to expect fairly stable gross profit margins for the balance of the year and opportunities for expansion over the longer term with increasing materials growth.

GAAP operating expenses for the quarter were $88.8 million, a decrease of 2% compared to the third quarter of 2017, including a 1% decrease in SG&A expenses and a 5% decrease in R&D expenses. Non-GAAP operating expenses in the third quarter were $73.7 million, a 3% decrease from the third quarter of the prior year and a 7% decrease sequentially.

While a portion of the decrease in operating expenses sequentially relates to timing of expenses, we are beginning to see the results of the actions we are taking to reduce our cost structure.

Compared to the 2017 quarter, non-GAAP SG&A expenses decreased 1% to $50.8 million and non-GAAP R&D expenses decreased 6% to $22.8 million as we begin to shift from development to marketing and sales support of the new products we have rolled out this year.

We continue to invest in IT and go-to-market, including new product launch (00:11:43) while at the same time, we have reduced overall head count and other employee-related expenses, resulting in lower operating expenses even as higher legal fees related to export compliance are ongoing.

We are very pleased with the progress we are making as we are executing on our plans to align resources with key priorities, reduce overhead costs, and leverage our IT infrastructure investments.

While operating expenses may vary quarter-to-quarter in the near term due to timing of expenses and product and sales cycles, we continue to expect cost structure improvements and increased operating leverage over the long term.

We used $12.1 million of cash in operations during the third quarter and $2.9 million of cash in operations in the first nine months of the year. We ended the quarter with $92.1 million cash on hand. We have continued to invest in IT transformation and go-to-market, including support for new product rollouts.

Support for the rollout and ramping of new products also included a significant increase in inventory as a result of timing of supply chain lead times and product production and shipment plans for our expanded portfolio.

In the third quarter, we also paid a previously accrued liability related to the conclusion of litigation in connection with the prior acquisition, which used $9.1 million of cash during the quarter.

We expect cash use and generation will continue to fluctuate from period-to-period as we continue to make the investments we believe are critical, while at the same time improving our operational performance over time.

We are pleased with the overall progress we are seeing year-to-date in many areas, and we continue to be keenly focused on execution and operational efficiency to drive long-term growth and profitability. With that, I'll turn the call back to VJ for some concluding remarks.

VJ?.

Thanks, John. We are pleased with our results this quarter and the progress we have made to transform the company. We have improved our worldwide execution to better leverage our unmatched offering of editing solutions for the entire digital manufacturing workflow.

We are very excited about our enhanced and complete end-to-end portfolio, our ongoing innovation and significant market opportunity. We are building the foundation for growth to scale the company and strengthen our leadership position in the industry.

We are focused on operational excellence and customer-driven innovation to expand applications and use cases through our advanced and complete workflow solutions. We have the leadership, expertise, talent and partnerships, combined with the best and the broadest portfolio to drive customer shift to 3D production.

And with that, I would like to turn the call back to Stacey, who will open the floor for questions.

Stacey?.

Thanks, VJ. We'll now open the call to questions. We ask you to limit yourself to one question and one follow-up, thus allowing others to participate in the discussion. As a reminder, please direct all questions to the teleconference portion of this call. The telephone numbers are provided again on the slide.

If you are calling inside the U.S., the number is 1-877-407-8291. If you're calling outside the U.S., the number is 1-201-689-8345..

Thank you. At this time, we will conduct a question-and-answer session. Our first question comes from Ananda Baruah with Loop Capital. Please proceed with your question..

Hi. Good afternoon, guys. Appreciate taking the question. A couple if I could.

Just with regards to new product introductions that occurred during the September quarter and the 8% revenue growth, similar to last quarter, could you just sort of unpack for us how much the new products contributed to the revenue growth this quarter? And then any – VJ, any context you could give us around kind of the ramp of Figure 4? I believe the modulars those (00:16:45) – it's a modular shipping, it's not shipping from 2019, I think.

But if that change, let us know. And do you think the DMP 500 – when will the DMP 500 be out? And then I have a follow-up. Thanks a lot..

So, yeah, okay. So you have three phases of questions. So let me go one by one. So I think the important part is we had a very good quarter with respect to the overall printer hardware revenue growth, 17%, and then the unit growth because, as you know, there are categories now which are like $5,000 to $22,000 within the low price point.

So we had an incredible 93% unit growth with 17% overall hardware revenue growth. The new products are just ramping. So I think you're going to see more effect of that in Q4 and 2019. But we are very pleased with the response that we are getting in the marketplace. So that's the first part of the question.

Second, on the Figure 4, the dental product which won two big awards, the NextDent 5100, the response is fantastic and this is global response. And I do believe that that's going to be a very important category for 2019 taking our hardware and then getting the materials growth that you will see in 2019.

The third part about the modular, modular will be introduced in 2019. And then the fourth question on DMP 500, that's a significant product, especially with our partnership with GF Machining.

I really believe this partnership is going to be very important in a mixed environment where you have the traditional subtractive and a ready manufacturing, they bring tremendous capability with respect to the go-to-market and also in terms of the post-processing and automation. So, the DMP 500, we have introduced, there are already customers.

But the real scale in the DMP 500 will happen in 2019..

Thanks, VJ. That's really helpful. And then just quickly, John, you mentioned stable gross margins for the balance of the year which would be just this quarter if taken literally. Is the spirit of kind of into 2019, foreseeable future like that or is it really kind of just December quarter or March? Thanks..

Yeah. I think definitely for the balance of the year but to your point, we don't anticipate big margin fluctuations entering 2019 at this point either.

So, if you look at the last four quarters, three or four quarters on a non-GAAP basis, we're plus or minus 1 point or 1-point-something but we think margins will continue certainly for the foreseeable future on that type of a trend line, and we'll keep you posted on a quarter-by-quarter basis..

Got it. Thanks a lot..

You bet..

Our next question comes from Wamsi Mohan with Bank of America. Please proceed with your question..

Hello..

Hi. Thank you. Hi, VJ. Hi, John..

Hi, Wamsi..

Hi. A couple of questions, I guess. Can you just talk about the revenue environment more broadly? I mean, it looks like there is a pretty broad macro slowdown across industrial and auto in China.

So just what is your view of the broader demand environment and did that impact like revenue from a sequential perspective here in the third quarter?.

So, I think if we look at the revenue in our Q3, we had two things happening. One, our metal printers, we had more demand than we could really fulfill in terms of the manufacturing capacity. And we are working on it now in building the capacity for our metal printers.

And the second thing is we talked about ODM business, where we have to change the way we – global sourcing is done for our parts business, and that also had impact in Q3. And it will have a little bit more impact in Q4, the ODM in terms of the revenue.

So for us, we actually see really no impact of overall – any globally issue with respect to the revenue. As a matter of fact, if you look at our Asia Pacific revenue, we grew 27% in Q3.

So I think for us it was internal, those two things that I talked about, the metals and the ODM but when you look at 93% unit growth, actually, we are gaining share as far as the unit share is concerned..

And VJ, this metal printer sort of couldn't meet the demand and you guys are sort of constrained on supply.

Do you expect that to reverse and that become a tailwind here in the fourth quarter?.

Not in fourth quarter. I think we have still demand which is outstripping our manufacturing capacity. But we are working hard and in 2019, we should be able to do that. Remember, we got a great product in the ProX DMP 350 and DMP Factory 500 and we're partnering with GF.

So it's really – those two things are creating the demand that we need to now figure out how we can really build our manufacturing capability. And I think....

Yeah. And Wamsi, the other thing to think about is that I think we mentioned it somewhat in the – some of it in the prepared materials around inventory in general. But yeah, some of that parts of things are long lead times in the metal space. So as we see this heightened demand, our ability to respond and plan for that now is underway..

Okay. Thanks for the color.

And if I could, really quick, how much of the inventory step-up was from preparing for these new product launches and what's your expectation around timing for becoming free cash flow positive here?.

Yeah. The majority of the inventory uptick was related to new products, both in plastics and metals and both in from a finished goods point of view and from a component kind of build, all the way to spare parts and getting ready to be able to service these products in the field. We haven't given any direction on the timing of free cash flow, Wamsi.

But what I will tell you is that, I mean we're being very planful and thoughtful in terms of how we're utilizing cash right now. We understand what we're doing and not something that we're overly worried about, but we also understand what our options are for cash on a go-forward basis.

And as we start to normalize from an inventory point of view, we should see the benefit of that for sure. And as our performance continues to improve from a profitability point of view, we'll see the benefit from that as well..

Okay. Thanks a lot, John. Thanks, VJ..

Thank you..

Our next question comes from David Ryzhik with Susquehanna. Please proceed with your question..

Hi. Thanks so much for taking the question. So for materials, I think you mentioned you anticipate perhaps an acceleration of materials growth. Can you just talk about what gives you the confidence that that can occur? I'm just looking at the first nine months of 2018. I guess the average growth rate is 1% per quarter, so – on a year-over-year basis.

I just wanted to know if this is based on any kind of internal analysis on utilization or not?.

Yeah..

And I have a follow-up..

Yeah. So I think there are two parts. The first part is the focus that we have on getting the productive installed base is very, very important for us. So if you think about – for last four quarters, our unit growth has gone from 8% to 15% to 44% to 38% to 93%. And that's really installing those productive units.

The second part is we know by technology what kind of usage we can expect and that's a very important part of the equation. So the first part is the unit and the actual installed base growth, then by technology, what kind of a usage that we're going to have.

And the third very important part is, we are maintaining the average selling price of our materials portfolio. So I think those three things, the way we put the equation together in terms of how do we really build the right kind of a portfolio and there is a lag between the actually placing the units and getting the right kind of a materials growth.

So starting 2019, we are very confident that we are going to have the materials growth that we are really looking for. So that the business model that we have talked about, putting the installed base and then enjoying the annuity stream will come true..

Great, thanks.

And just drilling back to metals, if you were able to fill all those orders, would it have been a material impact to September quarter results? And then broadly speaking, can you give us a sense of how material the metals business can become? Can it become 5% or 10% of revenue by 2019? Just would love some kind of color around this because it sounds like you guys are gaining some traction there with the ProX DMP 350.

Thanks so much..

Yeah. I think we're not going to break down our revenue but I think the important part is we believe that between metals and ODM, it could have been a significant growth that we would have seen in Q3.

But I believe that our success of our ProX DMP 320, the ProX DMP 350 platform and then at IMTS, we really showed our DMP Factory 500 product with really GF and us together, and the response that we are getting and the customers who are really getting interested in our metal technology with our lower value proposition in terms of total cost of operation and the precision, plus the healthcare segment that we are really focused on is really giving me a lot of positive feeling about our metal business, and that could become a significant part of our overall revenue growth in 2019..

Got it. Thanks so much..

Our next question comes from Brian Drab with William Blair. Please proceed with your question..

Hey, Brian..

Hey. Thanks for taking my questions. I guess the first question I was looking for a little more clarity in your comments around printer revenue and just how to think about this. So, I know year-over-year I think you would probably admit that you had a fairly easy comp year-over-year.

And if you'd just humor me for a minute and look at it sequentially, down $5 million sequentially in printer revenue, and my impression was that we wouldn't see based on your 2Q comment was that we probably wouldn't see that much seasonality from 2Q to 3Q, and you have the new products rolling out. I'm wondering if you could just comment on....

Yeah..

...whether you are surprised to see that sequential decline or what you think about that. Thanks..

No. I think the way I told you about the metals is where we had more orders than we could fulfill is the real reason. I do believe that if you think about year-to-date, our printer revenue growth has been 28%.

That itself tells you that it was not just the easy compare, but we absolutely believe that we are gaining share in all the categories from $5,000 price point to $20,000 price point to $100,000 price point, all the way to $400,000 to $500,000 price point.

So I really think that's – my view is, this is something that I've been really telegraphing saying, look, we had healthcare revenue growth, we had software. And now we need to really make sure that with our strength of the portfolio I want to drive the printer hardware revenue growth.

I think the next thing that we all need to look at it in 2019 how that now really translates into the materials revenue growth. And I think I am very confident that in 2019 we will show the materials growth. So I really believe that's how we should look at it, it's a build and that's how we should look at it.

The other important part is having these new categories at $5,000 price point and $20,000 price point, we have a lot of work to do in building the awareness, getting the marketing right, because these are new categories. But if you think about what we are doing with our FabPro, we are going really at $5,000 entry level industrial printer.

If you think about $20,000 price point, we are really going after a functional prototyping business with Figure 4 capability. In my view, competitively, we are placed way better than any other competitor at those price points.

So I just think that it just requires our sales and marketing machine now working in driving the potential that we have in terms of the gaining share and driving the hardware revenue, which will set us up very well in 2019 for materials..

Okay. Okay. Thanks. And then just since we're talking about materials, I guess my follow-on is going to be on that category and....

Sure..

...the gross margin has come down, right?.

Sure..

If you look back to the average in 2016, it was 77% and 2017, 73%. This quarter, it was 69%.

So as we look out to this building the foundation for the materials to come, should we expect this gross margin for materials to stabilize here and you'll get 70% gross margin on those materials or is this going to continue to kind of come down and why has it come down?.

Yeah. So, Brian, this is John. Clearly, we've got a lot of mixed things going on from materials. We have that every quarter. But as you see, so as we look at both plastics and metals, clearly, the mix between plastics and metals materials has an impact on overall what we report in the Q, metals margins being lower than plastics margins.

And then we have mix within different – if you think about that overall 71% and 72% and it's hard to go back 2016 because we have other things like Vertex now with lower margins and so forth. But if you think even over the last several quarters, the real driver of fluctuations that we're seeing in margins for materials now is simply mix.

And so, we're not out there pricing dramatically or anything like that, it's really mixed base. So I think we'll see some fluctuations both up and down in margins over the next several quarters based on mix. And we'll give you a color on what's going on from a mix point of view.

There's nothing surprising for us anyways in terms of what we saw based on the mix..

And our success in metals will also drive more and more metals materials..

Yeah. Metals becomes a higher percent and that's a great thing from a growth point of view and the margin profile for metals is lower. And on a consolidated basis, you'll see the impact of that on materials margins..

Okay, okay. Thank you very much..

You bet..

Thank you..

Our next question comes from Shannon Cross with Cross Research. Please proceed with your question..

Hey, Shannon..

Hi. How are you? Thank you for taking the question..

How are you doing?.

Hi..

Can you talk a bit about what you've done in the U.S. in terms of the changes in go-to-market? I know you said you still have work to do overall.

But with some of the management changes you've had in the region, if you could be a little bit more specific and maybe, I don't know, what inning are we in in terms of where you were versus where you're trying to get to?.

Sure. So I think there are three things that we have done. The first one is to really have the right balance between the indirect and direct go-to-market model. The second thing that we have done, we've brought the pipeline processes that we had started in Europe and now, we're applying that in both Americas and in Asia Pacific.

And the third thing that we are doing is the lead generation because I absolutely believe that if you look at what we have done with respect to marketing, and at IMTS was the example that how we showed up in terms of really focusing on production workflows, and I think that will drive the lead generation which will be very important in terms of really building the right go-to-market engine.

We think we're in the fifth or sixth inning of the go-to-market build. And we are now seeing that kind of a performance across the three regions. And I really believe that the work that now we need to do is to really train both our channel partners and our sales force about the production workflow..

And then in terms of the aligner market, I know some of the competition has made some noise about getting more involved in that business. But clearly, it's a big market opportunity, although Align had a bit of a stumble on the most recent quarter.

So can you sort of talk about where you see that market, how you see it sort of – I don't know, as everybody moves to Invisalign as – well, or whatever it's called as opposed to paying for braces like our son did, how we should think about your opportunity again with some of the competition that has made some noise?.

Yeah. They can make the noise. But really, we can always look at who are the leaders and which technology is really providing the right solution. I think Align, there is no question in my mind, they are the leaders, and they will continue to be leaders globally.

Because it's not just about having early start, but the kind of a solution that you need to have to work with the orthodontic community, working with and building that whole software workflow and the solution that we provide in terms of the cost structure and in terms of the patient outcome is unparalleled.

And I really believe that that leadership that we have working with them – as a matter of fact, I'm using that as an example of how you really build the production workflows where the software workflow, the hardware and materials will become very important to us.

So my view is we have a lead, and we are going global with them and they are a great partner..

Okay. And then I guess, John, can you just talk a little bit about cash flow at $91 million – you're down to $91 million of unencumbered cash and I know it'll be lumpy in that.

But just, what are your options for liquidity if you needed to get them or how are you sort of thinking about it if we did go into recession? Just – I'm sure you're thinking about sort of where the company will be in the next couple of years. So anything you can provide would be helpful. Thank you..

Yeah. Yeah, sure, Shannon. I think it's pretty clear from Q2 to Q3, what drove our use of cash in terms of about a $14 million inventory build primarily in support of all the new products. We knew we would be faced with a litigation settlement. It came in Q3 and that was an additional $9.1 million.

And then we've done some small things that we always have, timing of year-wise, stock settlements on employee stock, things like that. So, very well understood. I think to your point, right now as I think, we have a revolver in place. We've never tapped into that, but it's always comforting to know that we have a $150 million revolver out there.

So that's a good thing. I think that I won't get into any specifics, but as you might imagine, we're always understanding what our liquidity options would be beyond that, although we don't anticipate anything that would suggest that we would find ourselves in a place like that any time soon.

So, I think that clearly understand that people are watching the cash balance over time but we're extremely planful in what we're using that for and we'll continue to be planful in terms of what our needs are and what our uses will be with a company that we expect to continue to grow..

Thank you..

You bet..

Our next question comes from Hendi Susanto with Gabelli & Company. Please proceed with your question..

Good evening, VJ and John..

Yeah..

VJ, it is great to see three consecutive double-digit printer revenue growth in the first nine months. Having said that, printer services revenue growth rates were significantly below those of printer revenue growth rate. And I was expecting that printer service have some kind of attachment.

How should we think about the gap between the two, and when can we see printer service revenue growth profile catching up?.

Well, I think the services has more than just the printer services. That's the first thing that I want to say.

And clearly, we are focused on making sure that we provide the right kind of a break and fix services and that will follow as our revenue growth and the more and more units are placed, we will be able to win the maintenance contract, especially after one year.

And then that's where you will be able to see the impact of this unit placements we have for our break and fix services revenue..

Does that imply that currently the attachment rate is lower and then....

No, no, no, no. What I mean by that is you are asking – you are seeing the double-digit growth in the hardware revenue. When will that reflect into the break and fix services? I'm saying there's a 12-month delay in terms of – because that's when you start talking about the maintenance contract. So that's what I'm talking – just like materials..

Materials has a lag time for usage. Service has a lag time for our renewal space (00:40:54)..

There is nothing any different. We are winning every maintenance contract in terms of the renewal that we get..

Got it. Thank you, VJ. Thank you, John..

You bet. Thank you..

Thank you..

Thank you. At this time, I would like to turn the call back over to Stacey Witten for closing comment..

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

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation..