3D Systems (DDD) Q3 2026 Earnings Call: Revenue Up 10.9%, Margin Expands

Key Takeaways

• Third-quarter revenue rose 10.9% year over year to $99.3 million on an adjusted basis excluding the enterprise software businesses divested in 2025.
• 3D Systems’ four strategic markets—MedTech, dental, aerospace and defense, and data center infrastructure—collectively grew nearly 30% year over year and nearly 25% year to date.
• Non-GAAP gross margin expanded 420 basis points to 35.5%, while non-GAAP operating expenses declined nearly 15% to $36.1 million.
• Adjusted EBITDA reached $3.1 million, improving by $13.1 million from the prior-year period. Year-to-date Adjusted EBITDA was $4.4 million.
• Management guided for fourth-quarter revenue of $100 million to $103 million and Adjusted EBITDA between negative $2 million and breakeven.
• Management expects healthcare markets to deliver relatively predictable double-digit growth over the next two to three years, while industrial growth may be less consistent because of defense program and customer order timing.

Core Financial Data

Printer hardware systems and parts manufacturing each grew more than 25% year over year. Year-to-date non-GAAP operating expenses declined $31 million, or 22%, to $112 million.

Business and Operating Performance

Healthcare Solutions benefited from growth in both dental and MedTech. Dental material sales increased at a strong double-digit rate as aligner volumes returned to their longer-term run rate and adoption of denture printing technology increased in the United States and Europe.

MedTech growth was supported by orthopedic implant applications, including spinal cages, knees and shoulders. Personalized healthcare solutions also expanded, led by surgical planning for cranial and trauma procedures. The company is increasing capacity for titanium implants and personalized medical-grade PEEK applications.

Within Industrial Solutions, aerospace and defense and data center infrastructure posted strong double-digit growth. Management said aerospace and defense revenue increased more than 50% in the quarter excluding the Air Force development program, while year-to-date revenue in that market rose more than 30%.

Demand included DMP 350 metal printers and SLA 825 polymer printers. Semiconductor manufacturing equipment and high-performance computing applications also contributed, with customers adding printer capacity during the quarter.

3D Systems is expanding its metal parts manufacturing capacity through an additional 50,000 square feet at its Littleton, Colorado facility. The expansion will house printers and post-print processing equipment for industrial metal parts while freeing capacity for growing medical implant demand.

The company highlighted two metal manufacturing growth paths: direct metal printing and additive manufacturing for investment casting. Its key platforms include the DMP Flex 350 Triple, DMP 500, SLA 825 Dual and MJP 300W Plus.

Management Guidance

For Q4 2026, management expects:

• Revenue of $100 million to $103 million.
• Adjusted EBITDA between negative $2 million and breakeven.

The outlook incorporates variability in customer order timing, program-linked purchasing decisions and a more even distribution of printer material orders throughout the year. Management also expects the historical fourth-quarter hardware uplift to be more muted because of weakness in consumer-facing industrial markets.

Operating expenses may be slightly higher in Q4 and Q1 because of normal seasonal items, but management said its cost discipline and lean operating structure should remain in place.

Risks and Watch Items

• Aerospace and defense results may be uneven between quarters because revenue depends on program and procurement timing.
• Price-sensitive industrial markets, including jewelry and parts of general manufacturing, recorded double-digit declines and remain a headwind.
• Management cited conflict in the Middle East and inflationary pressure on consumers as constraints on jewelry and other consumer-facing demand.
• Two healthcare customers have each represented at least 10% of revenue in recent quarters, creating customer concentration exposure.
• The company must fund capacity, raw materials and new platform development before some industrial opportunities reach scale.
• The board is continuing its search for a successor to President and CEO Dr. Jeffrey Graves, who said he remains committed to supporting the transition.

Analyst Q&A Highlights

Management confirmed that additional metal printer platforms are under consideration, ranging from 600 millimeters to 800 millimeters and potentially meter-scale systems. These platforms are beyond the concept stage, but final designs will depend on the highest-value applications in AI infrastructure, semiconductor equipment, aerospace and defense.

The company completed a previously announced large-scale investment casting order for a rocketry customer. Management said the systems are operational and producing parts used in space launches, supporting expectations for further demand from the sector.

Management described recent capital structure actions as preparation for growth. 3D Systems launched an at-the-market equity program and plans to exchange its 2030 secured notes for new unsecured notes due in 2031, together with cash and common stock. The company said these measures should provide greater flexibility to fund parts capacity, metal printing platforms and strategic-market expansion.

Management expects healthcare growth to be steadier than industrial growth. Industrial opportunities in AI infrastructure, aerospace and defense could be substantial, but are expected to arrive in waves and require sufficient capital to respond quickly with parts capacity and printer production.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

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

Monica Gould

Hello and welcome to 3D Systems' Third 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.

Jeffrey Graves

Thank you, Monica, and good morning, everyone. Our third quarter showed clear continued progress. Revenue grew at double-digit rates year-over-year, excluding the impact of the enterprise software divestitures we completed in 2025. Gross margins expanded, operating expenses declined significantly, and we again delivered positive Adjusted EBITDA. Phyllis will walk through the financial details with you shortly. What's most encouraging to me is not simply the numbers, but the source of the growth: accelerating penetration of our 4 strategic markets.

These are medical technology, dental, aerospace and defense, and data center infrastructure. Customers in these markets are choosing us for the design flexibility additive manufacturing uniquely provides, together with the part quality, regulatory rigor, and very importantly, the production economics required for true manufacturing at scale. We're winning significant new business on the strength of these capabilities. At the same time, in an increasingly unpredictable global environment, customers in both the United States and Europe are placing greater value on localized supply chains. With established operations in both of these regions, we're well positioned to be a long-term partner wherever they choose to manufacture.

The past 3 years demanded hard priority decisions and disciplined execution. Through our prolonged industry downtrend, we reduced costs while protecting the technology and application investments that matter the most. We continue to do this. We concentrated those investments on markets where additive manufacturing creates meaningful, durable value—the 4 key markets we focus on today.

As the headwinds now begin to recede, the benefits are becoming clear. Revenue is growing, margins are expanding, profitability is strengthening, and most importantly, customer adoption is accelerating. I want to thank our employees around the world. Their commitment has made this progress possible.

Turning to slide 5, let me put the quarter in the context of those 4 key markets: medical technology, dental, aerospace and defense, and data center infrastructure, which includes, by the way, semiconductor equipment, advanced GPU cooling, and energy applications. In MedTech, demand for both standard and personalized orthopedic implants continues to grow, driving both parts revenue and printer sales. We're expanding production capacity to meet it. Titanium remains a central focus, and the quality and economics of our titanium printing are compelling.

An accelerating trend is medical-grade PEEK for personalized bone replacements, a material that combines biocompatibility, bone-like mechanical properties, and radiation transparency for X-rays and cancer treatments. We also continue to see steady growth in our personalized health solutions business, where we work directly with surgeons to plan procedures and deliver custom FDA-approved cutting guides and increasingly custom bone replacements. MedTech continues to deliver solid growth, and with new technologies and improving economics, we expect that to continue.

In dental, material revenue recovered in the third quarter as aligner volumes returned to their longer-term run rate, and adoption of our denture printing technology by labs across the United States and Europe continued to rise. We expect these trends to strengthen as 3D printing becomes the standard manufacturing process for dentures.

In aerospace and defense, revenue grew more than 50% in the quarter, excluding our Air Force development program, driven by printer sales into space launch systems and a range of other defense applications. This is a large and exciting market, although growing exposure to defense program timing may make quarterly results somewhat lumpier as we grow. On a rolling 12-month basis, however, we expect a clear upward trend. Near-term, rocket propulsion applications remain the most compelling opportunities.

In data center infrastructure, semiconductor and high-performance computing revenue grew significantly. Our metal printing technology is already producing components for semiconductor manufacturing equipment and advanced computing systems, and customers added printer capacity in the quarter to support that work. We expect this area to grow and become a material revenue stream for our industrial business over time.

These 4 markets are at the core of our growth strategy and will continue to receive the majority of our investments. Underlying technology also applies to select consumer-facing markets, allowing us to participate opportunistically in them.

Moving on to slide 6, looking ahead, we see 2 important complementary drivers of growth, both centered on the manufacture of metal parts. Our ability to address both of these opportunities with differentiated technologies and deep applications expertise gives us a unique position in the industry. The first of these is the continued expansion of direct metal printing for production applications. As the technology advances, customers can manufacture larger, more complex, and higher-value metal components at scale. For us, the cornerstone is titanium printing, leveraging our deep expertise in printing for the human body.

Those volumes are rising, and the rapid expansion of titanium applications in aerospace has opened entirely new markets. Our quality systems and infrastructure built for human applications are now a powerful advantage as we extend into the industrial markets. The second driver is the growing use of additive manufacturing within investment casting. Here, the opportunity is not to replace an established process, but to make it faster, more flexible, and capable of producing increasingly complex designs.

I'd like to cover each of these in greater detail: what's driving the market, how additive fits into the workflow, and why we believe we're well positioned to capture the growth. So moving on to slide 7.

Investment casting is essential for many high-performance metal components, particularly in aerospace and defense, from rocket propulsion systems and turbine blades to complex structural parts. Industry estimates place the global investment casting market at approximately $20 billion annually, with the U.S. representing a significant share and benefiting from strong aerospace and defense demand. For decades, the casting industry has relied on hard tooling to create molded polymer patterns. Hard tooling is expensive, slow to produce, and creates barriers to design changes once production begins.

Additive manufacturing changes that equation by producing casting patterns directly from digital designs. Customers can avoid tooling costs, dramatically reduce lead times, accelerate design iterations, and manufacture geometries that are difficult or impractical with conventional tools. The transformation of the commercial space industry illustrates what becomes possible when advances in propulsion, reusable launch systems, and modern manufacturing come together.

Over the past decade, launch cadence has increased dramatically, while the cost per kilogram of reaching low Earth orbit has fallen by more than an order of magnitude compared with earlier launch systems. Additive manufacturing has contributed to this progress by enabling complex propulsion components to be developed and produced faster, with fewer parts and greater design freedom. Importantly, when additive manufacturing is used to produce casting patterns, foundries can achieve these benefits while continuing to use the alloys, casting processes, and manufacturing expertise they already trust, minimizing the need to requalify finished components.

Now turning to slide 8. As shown on slide 8, we address the investment casting market with two core printing platforms. Our new SLA 825 Dual serves large-format casting applications, while the MJP 300W Plus provides high-resolution wax patterns for smaller precision industrial and aerospace castings. While our focus today is aerospace and defense, these systems also serve a number of other high-value applications, some of which are actually illustrated on the slide.

Turning to slide 9, let's look more closely at each platform, beginning with the SLA 825 Dual. This is our flagship large-format system with roots that reach back to the invention of 3D printing in the early 1980s. The SLA 825 Dual is designed for large-format cast components. Its scale, precision, speed, and ability to produce lightweight, stable patterns allow customers to create large single-piece designs, reducing assembly times and lead times.

Equally important is the print material and process that we use. Historically, as production volumes rise, the economics at some point favor a transition to injection molding with hard tooling. Through our QuickCast technology, lightweight patterns that are strong and leave virtually no residue during burnout can be printed using up to 50% less resin. That savings meaningfully changes the economics, raising the volume threshold at which hard tooling becomes attractive, thereby favoring 3D printing and the design flexibility that it enables. These factors are rapidly transforming the investment casting industry as new designs and improved manufacturing economics drive higher adoption rates.

Moving to slide 10, our newest MultiJet Printing system is highlighted. While the SLA 825 Dual is ideal for large components, the MJP 300W Plus brings high-resolution wax patterns to smaller precision investment castings, such as those used in smaller turbine engines that are rapidly expanding in use on drone aircraft, long-range munitions, and portable power systems. The high throughput these printers enable delivers excellent economics while retaining the precision and design flexibility inherent in 3D printing.

Because the wax patterns integrate directly into a customer's established lost-wax casting process, technology can be adopted without changing the metal alloys or manufacturing methods they've already qualified and trust. Together, the SLA and MJP platforms position us to participate broadly in the casting market with a strong emphasis on aerospace and defense applications that are growing so rapidly.

Turning to slide 11, let me next turn to direct metal printing, where we see some of our most significant long-term growth opportunities. Across aerospace and defense, energy, semiconductors, and healthcare, customers are moving rapidly to adopt and expand the use of direct metal printed parts. The reasons are straightforward. The technology can now reliably meet the highest standards of quality and performance while reaching the throughput rates required in production.

Parts that previously required multiple processing steps, each with their own scrap, rework, and precision assembly costs, can now often be produced in a single printing operation. Combined with the design flexibility of additive manufacturing, this is becoming a compelling value creator. And with AI dramatically accelerating design iterations, customers can adopt higher-performing, lower-cost designs much more quickly.

With advanced metal printing systems we're now fielding and our application engineering teams, we focused intensely for the last 3 years on aerospace and defense, and on the equipment manufacturers essential to semiconductor chip production. These markets, together with our traditional orthopedic applications, represent outstanding growth opportunities. The investments we've made are now producing clear results with increased shipments of large-frame metal printers and growing parts volume, both of which I'll touch on shortly.

Turning to slide 12. Our metals business has several important sources of differentiation built over many years. We've maintained a consistent, strong focus on metal printing technology, even through the recent industry recession. As a result, we now have systems very well suited to printing metals that are either highly reactive, such as titanium, or extremely difficult to process conventionally, such as nickel-based superalloys for flight systems, copper-nickel alloys for naval applications, and tungsten and other refractory metals that withstand extreme temperatures and stressful environments that are common in advanced energy systems.

This progress requires more than hardware. It required application specialists who developed the print processes needed for high-performance, high-reliability components. We do not simply sell equipment. Our application engineering group works closely with customers to develop and optimize applications and then help transition them into repeatable production workflows. The combination of platforms, materials, application expertise, and strategic partnerships with key customers gives us capabilities that are highly valued and very difficult to replicate, which positions us well as additive manufacturing moves toward scaled production.

Moving to slide 13 for a brief overview of 2 of our key metal platforms, the DMP 350 Triple and the DMP 500. The DMP Flex 350 Triple laser platform provides the productivity, process control, and material flexibility required for many of the most demanding production applications. The larger DMP 500 replicates this capability for larger parts. These systems are renowned for their ability to print the most difficult materials: lightweight, high-strength titanium alloys as well as extreme-performance nickel, copper, and refractory metal alloys. These materials are extremely difficult to process conventionally and therefore derive the highest value from additive manufacturing.

While the printing systems and application expertise provide clear value as customers qualify new components, the remaining barrier to large-scale adoption has been the availability of production parts to bridge the period from qualification to high-volume production. For targeted markets, we now offer this capability, allowing us to move customers smoothly from initial concept demonstration through process qualification and into low-volume production.

As volume demands then grow, we can provide printers and process knowledge for them to continue scaling at the pace they desire or with third-party manufacturers, while preserving the qualified processes and production parameters developed during the initial manufacturing phase. This approach has resonated very well with customers within aerospace and defense and AI infrastructure that value both our technology and our quality systems, which have deep roots in our medical device manufacturing experience.

Taken together, this approach reduces adoption barriers, generates attractive parts revenue, and creates future printer opportunities as customer demand expands. From a financial standpoint, the returns are sufficient to support the ongoing R&D required to maintain a leadership position in metal printing and to create growing value for our investors.

Nowhere is this approach more relevant than in defense. The defense industrial base faces well-documented constraints. As an example, lead times for critical naval castings often run from 12 to 24 months, and production capacity for key munitions, propulsion components, and others remain limited. High-end weapons, high-mix, low-volume production of complex alloy parts is precisely where additive manufacturing excels. It does not require new foundries or long-lead tooling. It can add capacity quickly and effectively.

This same model is highly relevant to semiconductor equipment manufacturing, where supply chain constraints, long qualification cycles, and limited production capacity create significant opportunities. These markets remain central to our long-term industrial growth strategy. In support of these efforts, we continue to work with the U.S. government, both on the development of new metal printing technology and on the application of metal additive manufacturing to next-generation energy and other national security applications.

As I wrap up the section on metals, I want to turn to slide 14. The growth I've just described is already translating into increased demand for production capacity. To expand our capacity for manufacturing metal parts, we recently celebrated the grand opening of our new facility in Littleton, Colorado. Building on the extensive fleet of metal and polymer systems already located there and the quality systems we have in place for our MedTech business, we cut the ribbon on an additional 50,000 square feet that will house printers and post-print processing equipment for metal parts in our key markets.

We'll add print capacity at the rate needed to support growing demand for industrial metal parts. By focusing this new facility on our industrial markets, we'll simultaneously free up capacity for our medical implants, where demand is also growing quickly. We were grateful to the key customers and the local, state, and federal representatives who joined us for this event. It was a terrific day.

Before turning the call over to Phyllis, I'd like to briefly comment on my planned transition. As announced in August, the independent directors of our Board continue to lead the search process for my successor. I remain fully committed to supporting this process while maintaining our operational momentum and positioning the company for long-term success. The strategy we have discussed today remains the right strategy for 3D Systems. We're committed to it, and I remain very optimistic about the company's future.

So moving to slide 24, operator, we're now ready for questions.

Phyllis Nordstrom

Thank you, Jeff, and good morning, everyone. I'll walk through our third quarter financial results, including the progress we made on profitability, and then discuss our recent capital structure actions and fourth quarter outlook.

Let's begin on slide 16. Before reviewing our financial results, I would like to remind you that we completed the divestiture of our legacy enterprise software businesses during 2025. Accordingly, the year-over-year comparisons I'll discuss today are presented on an adjusted basis, excluding the impact of those divestitures, to provide a consistent view of our operating performance across periods.

With that, let's turn to slide 17. Consolidated revenue increased 10.9% year-over-year to $99.3 million. All 4 strategic markets grew in the third quarter, collectively delivering nearly 30% year-over-year growth and nearly 25% growth year-to-date. This performance reflected positive momentum across our product portfolio. In aerospace and defense and data center infrastructure, we continue to see strong demand for our DMP 350 metal printer and our SLA 825 polymer printer. Additionally, parts manufacturing contributed meaningfully to revenue in MedTech and data center infrastructure in the quarter, while higher material sales benefited dental and aerospace and defense.

More broadly, printer hardware systems and parts manufacturing each grew more than 25% year-over-year, helping drive the quarter's double-digit revenue increase. Higher revenue also contributed to improved profitability. Adjusted EBITDA was positive $3.1 million, a significant improvement from the prior-year period, reflecting higher sales volume, favorable pricing, and continued operating discipline.

Moving to slide 18, I'll provide additional detail on our business segments. Healthcare Solutions revenue was $49 million for the third quarter, an increase of 14.4% from the prior-year period. Healthcare Solutions was driven by positive performance across both dental and MedTech. In dental, material sales increased at a strong double-digit rate compared to the prior-year period. MedTech benefited from continued demand for orthopedic implant applications, including spinal cages, knees, and shoulders. Our personalized healthcare solutions, or PHS business, also delivered growth, led by surgical planning solutions in cranial and trauma applications.

Moving to Industrial Solutions, revenue was $50.3 million, up 7.7% from the prior-year period. Within industrial, aerospace and defense, and data center infrastructure both delivered strong double-digit revenue growth. Year-to-date, aerospace and defense, our largest industrial market, increased more than 30% compared with the prior-year period. Revenue strength in these markets more than offset a double-digit decline in price-sensitive markets, including jewelry and certain areas of general manufacturing.

While we continue to selectively pursue opportunities in these areas, our investment priorities remain focused on areas where we have greater differentiation and see stronger potential for profitability. These results reinforce our strategy of focusing our resources on key markets where customers value precision, reliability, and qualified production outcomes. These demanding requirements align closely with our differentiated technology and applications expertise and create meaningful barriers to entry.

We are seeing these benefits in our results. Year-to-date, industrial revenue from our strategic markets grew nearly 50%, reflecting the progress we are making in shifting the business toward higher-value, more differentiated opportunities. We remain encouraged by the long-term potential in these markets while recognizing that the timing of customer investment and program-driven activity can vary from quarter to quarter.

Now turning to slide 19 to review gross margin. Third quarter non-GAAP gross margin was 35.5%, an increase of 420 basis points from the prior-year period. Higher printer parts manufacturing volumes improved cost absorption and operating leverage, while favorable product mix also contributed to higher gross profit. Importantly, the margin expansion reflects stronger operating performance as volumes increased across key areas of the business. The year-over-year comparison also benefited from the absence of certain non-recurring costs recorded in the prior period, including costs associated with the closure of a legacy facility and a one-time regenerative medicine accounting adjustment.

Turning now to slide 20, we remain disciplined in managing our cost structure while investing selectively in the areas that support our strategic priorities. Third quarter non-GAAP operating expenses were $36.1 million, a decrease of nearly 15% from the prior-year period. Year-to-date, non-GAAP operating expenses were $112 million, down $31 million or 22% compared to the prior-year period. Although operating expenses may fluctuate from quarter to quarter based on expense timing, we are seeing the benefits of the actions taken to reduce our operating costs and remain focused on maintaining that discipline as we grow the business.

Moving to slide 21. The combination of higher sales volumes, gross margin expansion, and our lower cost structure drove Adjusted EBITDA to $3.1 million, a $13.1 million improvement from the prior-year period. Year-to-date, Adjusted EBITDA was $4.4 million. This reflects the progress we have made through our prior cost reduction actions, together with higher sales and improved margins across products and markets.

Turning to earnings per share, third quarter non-GAAP diluted loss per share was $0.06, an improvement of $0.02 from the prior-year period. The difference between our GAAP and non-GAAP results reflected several key items, including costs related to a recent legal matter, a product-related asset impairment, and non-operating non-cash foreign currency impacts within APAC.

Now turning to slide 22 for a summary of our balance sheet. We ended the third quarter with $120.5 million in cash and investments, including $91.8 million of cash, cash equivalents and restricted cash, and $28.7 million of investments. At quarter end, we had $96 million of debt. Approximately $3.9 million will mature in the fourth quarter of 2026, with the remaining $92 million classified as long-term debt.

Since quarter end, we have taken 2 important steps to strengthen our balance sheet and enhance our capital structure, better positioning us to support the business and invest in opportunities that can drive profitable growth. First, we launched an at-the-market equity program. The ATM provides us with additional flexibility to access capital markets while maintaining discretion over the timing and execution of potential capital raises.

We also announced our plans to exchange our 2030 secured notes for new unsecured notes due in 2031, together with cash and common stock. Upon closing, we anticipate this new structure will extend our debt maturity, transition us to unsecured debt, and give us greater flexibility in managing liquidity and allocating capital. Together, we believe these actions will enhance our ability to invest in the areas where we see the greatest opportunity, including expanding our parts manufacturing capabilities, continuing to advance our metals portfolio, and accelerating focus on our strategic markets. Additional details on these capital structure initiatives are included in today's filings.

Moving now to slide 23. Turning to our fourth quarter outlook, we expect revenue between $100 million and $103 million, with Adjusted EBITDA between negative $2 million and breakeven. Following a strong third quarter, we expect fourth quarter revenue to remain on a positive trajectory. Our outlook reflects normal variability in customer order timing across several of our strategic markets, where purchasing decisions are often tied to customer programs, R&D priorities, and broader investment cycles. In addition, printer material orders have been spread more evenly throughout the year, resulting in less concentration at year-end than we have historically experienced.

We remain encouraged by the positive trends we see within our markets, while recognizing that the timing and pace of customer orders can vary between quarters. As we continue shifting the business toward these growing areas, we believe we are building a strong foundation for sustainable, profitable growth.

For the full year, we expect our results to reflect meaningful improvement in the underlying profitability of the company. Higher revenue, gross margin expansion, and a substantially lower cost structure have established a more efficient operating foundation. Looking ahead, improved operating performance and greater balance sheet flexibility positions us well to selectively invest in the areas that can support continued growth and improve profitability.

With that, I'll turn the call back to Jeff before we open the line for questions.

Jeffrey Graves

Thank you, Phyllis. To summarize, our focused strategy is producing results. Growth across our strategic markets is strong, operating margins are improving, and Adjusted EBITDA is strengthening. Most importantly, we're seeing increasing evidence that additive manufacturing is moving from prototyping into production across healthcare and industrial applications.

Looking ahead, we'll continue focusing our investments where our technology creates the greatest value, managing costs with discipline, and transitioning growth into stable profitability with sustainable cash generation and long-term shareholder value.

So moving to slide 24, operator, we're now ready for questions.

Operator

[Operator Instructions] Our first question comes from the line of Troy Jensen with Cantor Fitzgerald. Please proceed with your question.

Question-and-Answer Session

Troy Jensen

Jeff, I missed the Littleton launch, but I want to dive more into the metals. Thank you for the good update this quarter. Looking at your portfolio, I think it's just 2 platforms right now. So I'd be curious if you have a roadmap for much larger formats, and where are you on supportless overhangs and number of lasers? And I guess, to throw 3 questions into 1, can you also talk about post-processing partners and selling more of a solution there?

Jeffrey Graves

Yes, both categories are great questions, Troy. On the additional printer platforms, absolutely. And the decision there is, Troy, I would tell you, they're becoming a little bit more application specific. If you look at it right now, we have the 350 and the 500. And we're in discussions with folks ranging from 600 to 800, obviously a meter size. So we're beyond concept design on all of those sizes, trying to understand what is the right value proposition, what's the best volume and pricing for the components that are going to be produced, and make sure we dial in the size for that.

I think the whole industry, Troy, is going to move from having generic sizes to having sizes that reflect the size of certain market applications because they're growing quickly enough now that you can design printers for specific ecosystems, if you will, like AI infrastructure. You've got the companies that design the chip-making equipment, if you will, the multi-hundred-million-dollar type machines. The market potential for making components in those machines alone would justify its own type of printer, its own size of printer, if you will. Aerospace and defense is the same way. It depends heavily on what size components you're going to make. If you're going to make missile parts that are over a meter in diameter and 2 meters high, for that, the other applications are smaller components that can obviously be done in a smaller footprint.

So it's a long-winded way of saying we do absolutely plan on launching additional platforms. They're all well beyond the concept phase and ready for detailed engineering and then move into manufacturing. We are waiting to see what the highest potential applications are, and those customer discussions are heavily underway right now, which is part of the reason, Troy, quite honestly, we wanted to make sure our balance sheet's in good shape because those all require investments.

Once customers see you're going to have the machines, they want you to be ready to make parts and then ultimately sell them machines. So we've tried to have a logical progression. We have a building now to make parts in that's expanded for industrial. We'll soon have not only the current machines, but larger machines to go in that building, and we'll sell them to people that want to buy parts at first at limited volumes and then ultimately buy those printers for their own application. Those discussions, Troy, are all moving in parallel, both in AI infrastructure, the chip-making equipment folks, and in defense and aerospace. Does that all make sense?

Troy Jensen

Yes, that's great to hear. Thank you. If I could throw in a follow-up just for Phyllis, I think I noticed a second 10% customer in the quarter. I'm just curious if you could touch on that.

Phyllis Nordstrom

Yes, so both of those customers, I think the last couple of quarters have risen to that level. They're both within our healthcare business, supporting two different sides of the healthcare business. Obviously, we don't talk about their names, but two very important customers for us in our key priority markets, and we continue to have great partnerships with both of them.

Jeffrey Graves

And Troy, with the kind of volume discussions that are underway right now for parts and then ultimate printer sales, I would expect the emergence on the industrial side of equivalent-size customers over time. So we clearly have 2 big ones on the healthcare side right now in different parts of healthcare, dental and orthopedics. On the industrial side, I'd be shocked if we didn't have 10% customers in both AI infrastructure and in aerospace and defense.

Troy Jensen

Good to hear. All right. Congrats. Good luck in Q4.

Jeffrey Graves

Thanks so much, Troy.

Operator

Thank you. Our next question comes from the line of Gregory Palm with Craig-Hallum. Please proceed with your question.

Greg Palm

Maybe just to start, in light of the news on the debt exchange, on the surface it looks like the holders got a pretty lucrative deal, so maybe this is a good opportunity for you to sort of flesh out some of the details on why now and why does it make sense and all that.

Jeffrey Graves

So, Greg, do you ever know a case where debt holders don't get a lucrative deal? I think that's their business. But no, I have to compliment them, we have tremendous debt holders. They're great people. They have spent a lot of time understanding our business, and I could not ask for better partners from a debt standpoint. Now, they're in the business obviously to make money, and we are too. So it was a timely time to redo that structure, not only to push it out in time, but to make sure it was the most flexible debt structure we could have.

Because again, my biggest concern right now, Greg, I would tell you, is making sure we have the capital for investing in growth right now because the opportunities are going up by the day. And I think we have good line of sight on the healthcare side, so it's very predictable, both the denture growth and the orthopedic growth in our MedTech business. The potential volatility is on the industrial side. If you look at the progress that additive is making now in metals for both AI infrastructure and for aerospace and defense, it's enormous. And so those markets, when they hit, can be very large, and we want to have the capital available to us and flexible enough to invest for that growth because that's really where the payback comes from.

So yes, you always wish these deals were cheaper and better, but I think this was a very fair exchange. I appreciate our debt holders being willing to do it. The timing was driven by the opportunities we see coming over the horizon now and approaching us pretty quickly for CapEx investment. We've just got to be ready to do that. On the ATM side, that's why it's a flexible instrument. We don't have to use it, but if we have an opportunity and we need the investment, we can make it and capture that growth. Anything to add, Phyllis?

Greg Palm

No, that's helpful. It sounds like you're sort of doing this on the offense. I think it'd be helpful for all of us to understand kind of how you see things playing out over the next 2 years because we haven't really been accustomed to growth here in the recent past. And I know you've returned to growth, but as you look ahead, given the capital structure, given all these opportunities that are out in front of you, the Littleton expansion, what's going on in metals, how do you see that translating into growth over the coming years?

Jeffrey Graves

So there's 2 factors that you've got to weigh against each other, and time will tell the timing on each one. But for our 4 key markets that we're in for growth, again, 2 in healthcare, 2 in industrial, I think the healthcare side is very solid double-digit growth going forward and fairly predictable. It may not be linear, but it's fairly predictable over the next 2 to 3 years.

The industrial side, I think, is going to come in waves because there's so many good applications that are opening up right now. And our customers are going through the procurement process with the federal government on everything from munitions to drones, to flying aircraft, manned aircraft, and on the rocketry side, enormous potential as the demand for space access explodes. So the opportunities are there. The hard thing to predict is timing. If you look at our aerospace and defense, I think the number we put out was 50% growth. Now that may not happen every quarter year-over-year, but it is clearly a market that's growing really fast.

And additive, not only for us, but for others in the metal business, additive is going to have a key role in that because of the economics. They're earning their way in right now. But the added design flexibility they have to change designs... It's an unfortunate thing that the world is so war-prone right now. There's many fights going on all over the place. If you look at the headlines, the weaponry used and the reconnaissance vehicles used, all of that has changed so much in the last couple of years. That wouldn't be nearly as easy without additive manufacturing.

And that's why I think we're positioned really well. So in that environment, you just want to have a fair bit of dry powder because when somebody comes along and says, "Hey, I need 100 of these," or "Hey, I want 100, then I want to buy 3 printers," you've got to have the cash to say, "Yes, I'll put in the capacity, and I'll buy the raw materials to build the printers for you," because when they need it, they need it. And if you're there, it's really sticky business. If you're not there and you missed the window, then you open it up for someone else to come in.

So I love our model right now. We invested through the hard years, especially in metals. I would tell you, I'm really proud of our metal technology. It's built off of titanium and into other materials. And our big SLA system for supporting castings of metals, those two are highly differentiated areas that I think are going to really drive our growth in those 2 industrial markets. So we get really solid growth, double-digit growth, I believe, on the healthcare side. And I think we'll have strong double-digit growth in those markets.

Now, one last comment, and I apologize for going on, but the only thing working against us right now, Greg, are the markets we're exposed to on the industrial side that are more consumer-facing, so things that we've traditionally been pretty big in, like jewelry and service bureaus and stuff. Those guys, #1, they're under pressure from the war in the Middle East, so that hurts that business. The inflationary pressure on consumers in the Western world, at least from buying jewelry, things like that, clearly there's a lot of problems in that industry. We have some exposure to that industry. So that exposure will go down quarter by quarter, year by year as the other industrial markets grow, but it's a headwind for us.

Our printing platforms apply equally well to those markets. So if they're opportunistically growing, it's great for us. If they're shrinking, it's a headwind, but it's now outweighed by the growth in the high-end industrial markets, defense, aerospace, those, because overall the company's growing. Look at the difference though between those markets. The consumer-facing ones are shrinking. The high-reliability ones are growing fast. The net result is modest growth for the whole company, but that will increase over time because the headwinds on the consumer side will go down as we get bigger in the other markets. And that's the way we look at it.

So I'm really pleased. Our cash burn is dramatically reducing as volumes come through and the margins come through on these high-end systems. We will flip to positive operating cash flow and then ultimately support our CapEx investments. We've got to bridge that period, make sure we've got the cash to invest for the growth. So that's what brought this whole timing together. I'm super excited about the opportunities. I feel much better now about our balance sheet that we are poised to exploit those opportunities as they open up ahead of us.

Greg Palm

That covered it. And then I guess last one, and you kind of alluded to this, but you did announce this large-scale order for investment casting on the Q2 call. I was maybe hoping you can just update us on the progress there and maybe the broader opportunity with that customer and others.

Jeffrey Graves

Yes, Greg, that was in the rocketry space. That order is filled and flying. I mean, it was a tremendous opportunity, and that's more to my point about being able to exploit these opportunities. We were able to take an order, ship it within a series of a few months, get the units up running and operational, and today they're making parts that are flying into space. And that's the pace that industry is moving at, and I think we are very well positioned to continue supporting that.

We clearly have a lead in additive manufacturing for rocketry, for castings, and for direct metal printing, I'm very proud of our capability too. It's a smaller opportunity, and we're not participating heavily in that, but we are in the casting arena, which is the big opportunity. And the margin potential there is very nice with the consumables, as you know.

So the order's filled. They're very pleased with the product. I think we're the recognized leaders in the field. And the growth potential there, Greg, as you look at—these are publicly announced numbers—as you look at the planned cadence for rockets going into space, regardless of the customer that's sitting in there, you just look at the total global rocketry launch pace today, it is moving so quickly. So it will move from measured in months to weeks to days to hours over the next several years. And I think we're perfectly positioned for growth in that business.

Greg Palm

Okay. All right. Thanks.

Jeffrey Graves

Thanks, Greg. Thank you.

Operator

[Operator Instructions] Our next question comes from the line of [ Patrick Walravens ] with Needham & Company. Please proceed with your question.

Unknown Speaker

This is Patrick Muth on for Jim Ricchiuti over at Needham. You've typically seen a seasonal pickup in hardware sales in Q4, but it seems like that pattern has been a bit more variable over the last 2 years given macro conditions. Are you guys seeing early signs of normal seasonal strength playing out this year? And if so, which markets or product lines are leading that?

Jeffrey Graves

Yes, Patrick, it has been a consistent trend over many years, probably a little bit dampened last year because of the recession that our industry had. I would expect it will return, but I think over time, Patrick, what's going to happen is there's going to be more leveling of quarter-to-quarter performance. Companies will always have extra capital at the end of the year to spend. But as you look at the markets today, the consumer-facing markets are really tough. I don't think they're going to have an uptick in capital spending, from what I can tell.

The defense-related ones, aerospace, those guys, they've got a lot of capital to spend. Some of it will be seasonal, but remember a lot of those defense programs are tied to the federal budget, which is an October budget. So I think you'll see as aerospace and defense grows, you'll see that Q4 spike spreading out more. Maybe there'll be more into Q3. And with the softness in the consumer side of the business, I think that this year could be more muted. That's why we're being reasonably conservative about our growth projections for Q4. We'll be growing. I don't doubt that we'll be growing. But in terms of the magnitude of that, we just don't want to get out over our skis in predicting it to be more aggressive than what we can see. Hopefully we'll be surprised, but we'll see how that goes.

Unknown Speaker

Okay, great. Thanks for the color on that. And then maybe quickly, how are you guys thinking about OpEx in Q4? You've noted that OpEx has stabilized over the past 2 quarters following the completion of your cost reduction initiatives, but should we expect that level of discipline to hold throughout the rest of Q4, or are there any seasonal factors or year-end investments that can move OpEx up or down from where it's been running recently?

Phyllis Nordstrom

Yes, that's a great question. I would say yes, at the end of the year and early beginning of the following year, we typically in Q4 and Q1 see slightly higher OpEx. I think overall you're going to see the discipline carry through. I think the first-half OpEx spend that we had is pretty indicative of what you'll see for the back half of the year. So that's how I would look at it for 2026 performance.

Jeffrey Graves

Patrick, I want to compliment Phyllis on this call. She's done a really nice job. We have a very lean infrastructure now. There will be fluctuations in cost just due to normal cycles of insurance payments and all the annual kind of stuff that rolls through, but we're built to run lean, and I think that'll continue. Obviously, with volumes, there will be some parts that will scale with that, but we were built to run lean, and we expect more operating leverage going forward.

Unknown Speaker

Okay, great. Thank you guys so much.

Jeffrey Graves

Thanks, Patrick. Give Jim our best.

Operator

Thank you. We have now reached the end of our question and answer session. And with that, I would like to hand the call back over to Dr. Jeffrey Graves for any closing comments.

Jeffrey Graves

Great. Thank you all for joining us on our call today. We look forward to updating you on our progress following the close of the fourth quarter and the fiscal year. Have a wonderful holiday period. Thanks for the call.

Operator

This concludes today's conference. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.