3D Systems - Earnings Call - Q3 2025

Executive Summary

• Q3 revenue of $91.2M declined 19% YoY on lower volumes and Geomagic divest mix; non-GAAP diluted EPS was $(0.08) and adjusted EBITDA was $(10.8)M, with gross margin compressing to 32.3% as printer-heavy mix and the absence of a Q2 RegMed milestone weighed on profitability.
• Versus S&P Global consensus, revenue modestly missed ($91.25M vs $93.04M*) while non-GAAP EPS modestly beat (−$0.08 vs −$0.085*); EBITDA missed (−$10.8M vs −$8.2M*), reflecting gross margin pressure despite OpEx progress.
• Management guided Q4 revenue to grow sequentially by 8–10%, with gross margin and OpEx roughly flat q/q; CFO also targets Q4 OpEx marginally below Q3, with >$50M annualized savings on track by year-end.
• Strategic catalysts: launch of jetted monolithic dentures in the U.S. (buildup underway; EU approval targeted mid-2026), new MJP 300W Plus printer for jewelry, software portfolio realignment (divestiture of Oqton/3DXpert to focus on 3D Sprint), and expanding A&D/AI infrastructure applications and Saudi NAMI momentum (including SEC investment and Lockheed collaboration).

Note: Consensus figures marked with an asterisk (*) are Values retrieved from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Cost actions continuing to flow through: non-GAAP OpEx fell to $44.7M (−24% YoY ex-Geomagic) with >$50M annualized savings on track by year-end; management expects Q4 OpEx marginally below Q3.
  • Healthcare MedTech and PHS remain growth engines; management reiterated double-digit growth for PHS in FY25 and highlighted accelerating adoption of printed PEEK implants and trauma as fastest-growing area.
  • New product momentum and pipeline: U.S. launch of jetted monolithic dentures with growing backlog; MJP 300W Plus introduced for jewelry (30% productivity, 20% lower material usage vs prior); A&D and AI infrastructure applications progressing.

• What Went Wrong

  • Top-line softness persisted: revenue down 19% YoY to $91.2M, with Healthcare Solutions −22% and Industrial Solutions −16%; dental aligner demand remained a headwind.
  • Margin pressure: gross margin fell to 32.3% from 36.9% YoY and from 38.1% in Q2, driven by lower volumes, mix, manufacturing variances, and tariffs; EBITDA missed consensus.
  • Regenerative Medicine revenue declined sequentially after a Q2 LUNG milestone; management cited Q3 seasonal slowing and mix shift toward printers weighing margins near term.

Transcript

Operator (participant)

Greetings and welcome to the 3D Systems Third Quarter 2025 Earnings Conference Call and Webcast. At this time all participants are in listen only mode. A question and answer session will follow a formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It is now my pleasure to turn the call over to your host, Monica Gould, Investor Relations for 3D Systems. Please go ahead, Monica.

Monica Gould (Head of Investor Relations)

Thank you. Hello and welcome to the 3D Systems third quarter 2025 earnings conference call. With me on today's call are Dr. Jeffrey Graves, President and CEO, and Phyllis Nordstrom, Interim CFO. 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 the 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 the 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. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable periods of 2024. With that, I turn the call over to our CEO Jeff Graves for opening remarks.

Jeffrey Graves (President and CEO)

Thank you Monica and good morning everyone. I'll start today with a brief recap of our third quarter results. I'll provide some commentary on the overall market and then focus the remainder of my comments on our strategy and growth initiatives. I'll then turn things over to our Interim CFO Phyllis Nordstrom to provide details on the quarter's financials and we'll then open the call for Q&A. Let's turn to Slide 5. I'll start by reviewing our third quarter results at a high level. The macro environment for our company and 3D printing OEMs broadly remains challenging. This can be seen in our third quarter revenue of $91.2 million, which was down 13.8% year-over-year, soft but consistent with our normal seasonality trends.

As has been the case over the last several quarters, this overall softness continues to be driven by our customers' muted Capex spending for new production capacity stemming from uncertainty around tariffs. As such, we've taken aggressive actions to adjust our cost structure while maintaining core R&D investments to position the company for long-term growth when market conditions improve. As part of this effort, we've been rationalizing non-core assets, including the recently announced sale of Oqton and 3DXpert, which closed at the end of October. As you may know, these software platforms are not proprietary but were designed to serve the entire industry. While we will continue to remain very involved with the software, we believe that transitioning these solutions to an independent software developer will help drive them as the industry standard, which will help accelerate OEM adoption of additive manufacturing broadly.

We expect the financial impact of this disposition on our fourth quarter results to be approximately $1.2 million in revenue and $1 million on gross margin. This impact is reflected in our guidance for Q4. Turning to slide 6, we remain very focused on our core assets and continue our strategic investments in metal and polymer printing technology with emphasis on R&D activities that will drive our future growth and profitability. During the quarter, we launched some very important new printer platforms derived in this case from our expertise in photopolymer jetting technology. Jetting is a very special 3D printing technology that involves the simultaneous deposition of thousands of fine droplets of photopolymer. These droplets are cured by ultraviolet light as they're deposited onto the build platform.

The process can simultaneously deposit multiple materials in a fast but precise pattern to create a monolithic structure having distinct regions of coloration, geometry, and mechanical performance. It's a preferred approach where speed, precision, surface finish, and multi materials are required for an application. In the industrial segment, we introduced the MJP 300W Plus at the Istanbul Jewelry Show in early October. This new generation of jetting technology prints extremely intricate wax patterns used for casting precious metal jewelry, improving productivity by 30% and reducing gold, silver, or platinum waste by 20%. While the global jewelry market is competitive, it's transforming rapidly into a digital manufacturing ecosystem where a designer can embrace custom creativity without sacrificing cost competitiveness in the market.

Our advantage in this growing market is our recognized expertise in jetting technology, including both the printer itself and the custom wax materials that are essential for the post print casting process, as well as our expert channel partners that serve the thousands of local jewelry manufacturers around the world. Customer feedback on our new printing systems has been very positive and we've already begun to accept orders for this new printer platform, which given the size of this global market, we expect to accelerate rapidly in the quarters ahead. While fine jewelry is viewed broadly as a consumer business, it's embedded deeply in the culture of many countries around the world, which drives continuing demand growth, and the uniqueness of our wax materials, combined with the high rate of their consumption in the casting process, continue to make it an attractive market for our company.

On to slide 7 in applying jetting technology to the dental market. In the third quarter we announced the full commercial release of our NextDent Jetted Denture Solution for the U.S. market. Our consistent investment in this revolutionary dental technology has culminated in a truly outstanding denture product with associated excellent economics for dental labs across the Americas, Europe, and even in Asia. This first to market solution for jetted monolithic dentures utilizes multiple materials in a single printing process to deliver a durable, long wear, aesthetically beautiful prosthetic to patients. This results in a faster, more cost effective, and highly scalable alternative to traditional denture manufacturing, enabling both an outstanding patient experience and a strong return on investment for dental labs that provide these products to local dentist dental professionals each day.

We've already placed these printers with a dozen of the leading U.S. dental labs that serve the American market and feedback has been excellent. We're building backlog for the fourth quarter and are very excited about this market opportunity, which we believe will reach $1 billion in industry revenue across the U.S. and Europe alone over the next several years as the market transitions to 3D printing and away from machining and hand assembly.

Given the success that we've seen with our U.S. product launch in parallel with the European regulatory approval which we're targeting for mid-2026, we continue to work aggressively through the regulatory process in other markets throughout Central and South America and in Asia, which we expect to follow rapidly. With the addition of our Denture Solutions to our industry leading positions in both aligner technology and our NextDent dental materials portfolio, we expect dentistry to be one of our single largest revenue streams in the years ahead given the custom nature of the applications and the strict regulatory standards. Turning to slide 8. Another core area of focus for us is the MedTech half of our healthcare business. For 3D Systems, MedTech comprises our historical personalized health services business, our small but important point of care business, medical implants, and traditional printer and consumable sales to medical OEMs.

While we are most often prohibited from discussing details of our point of care efforts for long periods of time, these groups live within leading research and specialty hospitals around the world focusing on new and highly innovative applications of our medical 3D printing technology, which are extraordinary in terms of patient impact and provide the best indicators of where 3D printing can bring the most value to patients and hospital systems, including the future. As these applications are successful, we're well positioned to gain any required regulatory approvals and then bring them to the market broadly. While there are quarter to quarter fluctuations in growth rates for MedTech, particularly driven by seasonality of pre planned orthopedic procedures, this business remains on track to grow at a double digit rate once again this year.

To drive this consistent strong growth, we continue to build on our market leading position with new applications, materials, and printing technologies, the vast majority of which ultimately require regulatory approvals. This not only provides a strong pipeline of new patient indications that we can address, but also opens new markets for medical 3D printing such as trauma, which is now the fastest growing element of our PHS business. The key area for focus for us in MedTech is accelerating the use of our printed medical grade PEEK materials, that's Polyetheretherketone for short. These materials are biocompatible with properties very similar to native human bones and can be custom printed very quickly and economically.

Importantly, they complement titanium implants which have similar strength and compatibility, but instead of blocking radiation used for imaging or the treatment of cancer, PEEK materials are transparent to it, allowing doctors to observe and treat the underlying tissue when required. These printed PEEK materials are now being used in real life patient applications such as reconstruction of the face and skull from defects or injuries, and even addressing post cancer related surgical procedures and even trauma cases. An example of printed PEEK for a spinal application is shown on the right side of slide 8. In this case, we printed a porous PEEK implant tailored for enhanced bone growth, the results of which can easily be seen in the x-rays.

In addition to the patient benefits, our technology investments have brought the cost and response time down to the point where bones can be repaired in hours or days instead of weeks, further opening the range of cases that can be addressed from preplanned complex surgeries to rapid responses needed for trauma cases. We expect this trend to continue in the years ahead. Now let's turn to Slide 9. In addition to new printer and materials technologies, we also recently announced several important milestones in our Saudi Arabian Growth Initiative. In 2022, we established the National Additive Manufacturing Innovation Company, or NAMI for short, through a partnership with the Saudi Arabian Industrial Investments Company.

The goal of this venture was to enable Saudi Arabia's Vision 2030 program, which aims to create a strong local manufacturing base and enable the Kingdom to industrialize more rapidly through the adoption of industrial scale 3D printing. 3D Systems is the exclusive provider of printers and materials, both polymers and metals, to the joint venture with NAMI providing local application expertise, service, and support for customers. Recently we were proud to announce that the Saudi Electric Company, or SEC for short, the Middle East's largest electricity producer, signed an agreement to make a strategic investment in NAMI, acquiring a 30% stake in the venture capital with a goal of reducing costs and lead times for high demand spare parts through the creation of local manufacturing capability combined with advanced digital warehousing.

This partnership strengthens NAMI while deepening collaboration with SEC to establish new workflows that accelerate the adoption of 3D printing for critical energy infrastructure applications and to develop a skilled national workforce. Additionally, the Modern Isotopes Factory, or MIF for short, a Saudi Electric Company, a Saudi company established to support the expanding need for radioactive sources for industrial applications, has signed a framework agreement of $26 million with NAMI for the manufacture of up to 2,000 tungsten core components used in non destructive testing devices for pipelines and weldment inspection and in the key market of defense and aerospace.

Lockheed Martin recently announced a collaboration with NAMI to qualify and use additive manufacturing to develop critical military and aerospace components in Saudi Arabia, utilizing 3D Systems Direct Metal Printing Technology. While it has taken time to establish the local capabilities needed to support these customers, we're very excited to see our efforts begin to bear fruit in what we believe will be an increasingly important element of our global growth strategy in high reliability industrial markets in future years. Turning to Slide 10, I'll briefly touch on additional critical market opportunities before turning the call over to Phyllis. AI infrastructure as shown on the left hand side of Slide 10 and aerospace and defense highlighted on the right are two of the emerging growth opportunities that I'm most excited about given the exceptional level of investments now being made in these areas.

Starting with AI infrastructure, there are three key areas where we participate. These include semiconductor chip manufacturing where our 3D metal printing capability provides critical componentry for chip fabrication equipment, data centers where our ability to 3D print copper-based heat transfer components to help keep these high-intensity computational units cool are increasingly valuable, and for components used in gas turbine engines that are used to create the electricity that powers the data center. These markets are beginning to receive enormous investments around the world and we've been developing key applications for them for several years in anticipation of increasing demand. From an aerospace and defense standpoint, as printing technology has scaled and key materials for high-temperature and aggressive environment applications have come online, the applications for 3D printing have rapidly expanded.

Our latest efforts, which range from rocketry to naval applications and from human systems to drones, have shown great promise. These customers are not only working on a wide range of new applications of our technology, but encouraging us on a selective basis to support them from the developmental phase through initial component fabrication, particularly for low volume challenging part types. We select this work very carefully such that we can ultimately bridge the customer from limited part supply to full scale production either within their factories or to supplier of their choice. This business model is unique and we believe will be highly effective as we work hard to grow this portion of our business both in the U.S. and in Europe, from our regional locations in Colorado and in Leuven, Belgium. With that, I'd like to introduce Phyllis Nordstrom, our Interim CFO.

I've had the pleasure of working with Phyllis in several capacities for many years and I'm very pleased that she stepped into this important role and a such a challenging time for our industry. Phyllis.

Phyllis Nordstrom (Interim CFO and Chief Administrative Officer)

Thank you, Jeff. I appreciate everyone joining us today. I began at 3D Systems in 2021, serving as the Chief People Officer and then Chief Administrative Officer. In early September, I stepped into the role of Interim Chief Financial Officer. My background is in finance and accounting, and throughout my career, I've held a variety of roles within these areas. Most recently, I led audit and risk management teams at MTS Systems and PricewaterhouseCoopers, where I focused on advancing strategic priorities, driving operational excellence, and strengthening discipline around risk and controls. Before I begin a review of the third quarter results, I would like to remind you we completed the divestiture of our Geomagic software business on April 1st of this year.

As a result, throughout today's call we will reference both reported results and adjusted comparisons that exclude our Geomagic business, allowing for an apples-to-apples comparison of our performance across periods. With that, let's begin with a summary of our revenue which you'll find on slide 12. Third quarter consolidated revenue was $91.2 million, down 19% year-over-year or 14% when excluding Geomagic. Sequentially, revenue declined modestly, primarily reflecting typical third quarter seasonality and the absence of a regenerative medicine milestone that was recognized in the prior quarter. Within our segments, Industrial Solutions revenue of $48 million declined 16% year-over-year or 4.5% excluding Geomagic. These declines were primarily driven by softness in our printers and material sales in consumer facing end markets.

This was partially offset by continued momentum in aerospace and defense, which grew nearly 50% over the prior year. Healthcare Solutions revenue of $43 million decreased 22% from prior year, predominantly driven by lower sales within dental, with 2024 representing higher purchase volumes from a specific customer. Outside of our dental business, MedTech delivered solid growth, up 8% from the prior year and slightly ahead of last quarter. Additionally, we continue to see momentum in our PHS business with year-to-date growth of 10% through Q3. Now to slide 13. For the third quarter we reported a non-GAAP margin of 33% compared to 38% in the prior year and 34% when adjusted to exclude Geomagic. The year-over-year gross margin decline was modest, primarily driven by lower sales volume and reduced material sales. These impacts were partially offset by reduced inventory reserves compared to the prior year.

Gross margin declined sequentially reflecting the absence of the prior quarter's regenerative medicine milestone as previously discussed, as well as higher manufacturing variances in the period. Turning to Slide 14 and 15. We continue to demonstrate strong cost management in the quarter with non-GAAP operating expenses of $44.7 million, down 24% year-over-year when adjusted to exclude Geomagic and down 4.5% sequentially. This improvement reflects the impact of our cost reduction initiatives which run through the first half of 2026. Our cost actions are well underway and continue to focus on optimizing our organizational capacity, streamlining our facility footprint and reducing expenses across the business. Looking ahead, we expect continued reductions in expenses through the end of the year and are targeting fourth quarter operating expenses to be marginally below the current quarter.

To date, we are on track to deliver over $50 million in annualized savings by year end. As we look ahead to the fourth quarter and the first half of next year, our cost savings initiatives will be closely aligned to the company's strategic priorities for 2026, focusing our investments on the products and markets that offer the greatest opportunity both for growth and profitability. Turning now to Slide 16 to finalize the P&L. Adjusted EBITDA for the third quarter was -$10.8 million and an improvement of $3.5 million compared to the prior year. We reported a GAAP net loss of $18 million for the quarter or a GAAP loss per share of $0.14, a meaningful improvement compared to the $1.35 loss per share in the prior year period.

The improvement was primarily related to the absence of prior year asset impairment charges as well as lower amortization expense and lower operating expenses in the current quarter. On a non-GAAP basis, loss per share was $0.08, an improvement from $0.12 in the prior year period. This progress reflects our focus on cost reductions across the business. Turning now to slide 17 for a review of the balance sheet. We closed the quarter with $114 million in total cash, consisting of $95 million in cash and cash equivalents and $19 million in restricted cash. Total debt net of deferred financing costs was $123 million as of the end of the quarter. Of that total, $35 million is due in the fourth quarter of 2026, with the remaining balance due in 2030.

We have successfully reduced cash usage over the past two quarters and expect continued improvement as we execute on our remaining cost savings actions through the first half of next year. As we enter the fourth quarter, my priorities remain focused on completing our cost reduction initiatives while working closely with the business to prioritize key markets, products, services, and investments. These efforts are aimed at delivering meaningful impact both in the near term and throughout 2026. We thank you for your time and support of 3D Systems. We'll now open the line for questions. Operator.

Operator (participant)

Thank you. We will now be conducting a question and answer session. If you'd like to be placed into the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment please, while we pause for questions. Our first question today is coming from Troy Jensen from Lake Street Capital Markets. Rewind is now live.

Troy Jensen (Senior Research Analyst)

Hey, good morning, Jeff. Welcome, Phyllis. Thanks for taking my question here.

Jeffrey Graves (President and CEO)

Morning, Troy.

Troy Jensen (Senior Research Analyst)

Hey, quick, either one of you guys, just gross margins kind of dropped a lot sequentially here. It looked like it was mainly in products, but maybe in both products and services. Can you just touch a little bit on the decline in gross margins?

Phyllis Nordstrom (Interim CFO and Chief Administrative Officer)

Thanks, Troy. I think looking at gross margins quarter over quarter, there's really two main components. As I highlighted, RegMed, we recognized a milestone under our LUNG program in the prior quarter that was about, you know, $2 million of that total revenue that dropped down to the bottom line. We also had some manufacturing variances recognized in the quarter which also had an impact to our margin. I don't think peak going forward, but there was some scrap and some inventory reserves, some slower moving inventory that we had that we cleaned up this quarter. Looking ahead, you can see that we said gross margin would be flat quarter over quarter again. Jeff will touch on some of that. You know, printer revenue that we're seeing with the new products that will come in next quarter as well.

Jeffrey Graves (President and CEO)

All right, Troy, that explains Q3. If you look at going forward, there are offsetting factors. On the positive side, volumes going up, you know, the launch of our new products, we are selling more product, but it is concentrated in printers right now. Printers faster than materials. There will be a mix effect going forward, offsetting the volume benefit through the factory. That is largely it. We have a slight drag continuing on tariffs, but it is relatively constant. It is there. It is relatively constant quarter by quarter. That is it. It is pretty simple. Pretty simple puts and takes.

Troy Jensen (Senior Research Analyst)

Yep. All right, understood. Phyllis, just for you too, on the OpEx, I think I heard you say down slightly sequentially, but is there more to do on the cost cut efforts? I know you guys had some facility consolidations that were depending on timing. I guess what I'd ultimately like to get to is, is there a revenue level you think you guys need to hit once all these cost cuts are in place that'll get us to a breakeven?

Phyllis Nordstrom (Interim CFO and Chief Administrative Officer)

Troy, I'll start with the first part of your question and I'll let Jeff handle the second part of your question. The first part of the question. There is still more to go get. We've taken a lot of the organizational capacity actions already. There's still a little bit left to do, but the vast majority of that's behind us. The facilities take a little longer. There's work to do. We've made, I think, significant strides in getting ourselves into a place where the facilities will be ready to be exited that we've identified. It's a timing issue just with the market and ensuring we can get those things closed out. That'll happen, I think, at the first part of next year. In terms of OpEx, you're going to see a continued decline through the first half of 2026.

It'll be a little bit of puts and takes in terms of timing to achieve our total cost savings objectives here. As far as revenue, I'll let Jeff sort of cover where our OpEx would need to be in terms of revenue outlook. It's something that we're doing right now as part of our 2026 budgeting.

Jeffrey Graves (President and CEO)

The frustrating part of what Phyllis just said, Troy, is the timing around facilities. We've exited five or six facilities and they're on the market now. It's just a matter of timing to get them subleased or have the leases expire. That'll flow through over the next few quarters we're estimating. They're all in the market right now. The other question to me, very important, is where does OpEx need to be in order to really drive profitability and positive cash flow for the business? It's highly, obviously, on gross margin that we derive from sales. It'll be sales volume dependent, gross margin dependent. The good thing right now is we are selling a lot of high materials use printers. Our new products are largely focused on those.

It's these jetting solutions consume a lot of materials in the markets they serve. The new SLA printers, we have the large SLA printers, the large SLS printer that we go to market with. Those consume a lot of materials. You will continue to see us innovating on SLA and impacting all those product lines. They pull through a lot of materials so there's a lag when you first sell the printer on gross margin. We should see some nice continuous gross margin lift as they pull through materials. The OpEx, you could argue it to a couple of different levels depending on sales volume, for factory efficiencies and the gross margin we derive from those sales. I'm not giving you a crisp answer. Our original target of $70 million for these rounds of cost takeout.

We believe in a little bit more normalized environment, but not great environment, but a little bit more normalized environment. Through our gross margin estimates, we believe that would get us to positive cash flow profitability. I still believe that it all is dependent on the volume and mix that comes with increased sales. Good news is sales are picking up in Q4 as we've guided to, and all fingers crossed for 2026 that the world continues to improve.

Troy Jensen (Senior Research Analyst)

All right, thank you. Good luck going forward.

Jeffrey Graves (President and CEO)

Thanks Troy.

Operator (participant)

Thank you. Next question is coming from Greg Palm from Craig-Hallum. Your line is now live.

Jackson Schroeder (Research Analyst)

Hi, good morning, can you hear me?

Jeffrey Graves (President and CEO)

Yes, good morning.

Jackson Schroeder (Research Analyst)

Perfect. This is Jackson Schroeder on for Greg Palm. Just kind of wanted to talk a little bit more about what was press released last week with some of the new partnerships talking about with Lockheed Martin, some of the stuff out in the Middle East. Can you talk a little bit more about that, give some detail and maybe I mean obviously the end market and A&D but also kind of the products and what you're working on with them.

Jeffrey Graves (President and CEO)

Sure, yeah, absolutely. So we work with Lockheed Martin around the world and obviously in the U.S. They're a very big defense contractor, so very excited about business in the U.S. The unique thing about our Saudi initiative is when the Saudis are a big consumer of American defense products obviously and with that consumption goes a commitment from OEMs generally to spend money in the Kingdom. It drives them to look for innovation and local manufacturing of products. That is very consistent with why we set up our joint venture there in the first place. A lot of the JV is directed at the local Saudi infrastructure like oil and gas and electricity. Defense does benefit it substantially because of the requirement of the global defense OEMs to spend money in the Kingdom. It is very good for us, it helps build things.

The part types that they're interested in are very specific to what they sell in that part of the world and I can't comment on those. It's all the normal systems you would associate Lockheed with, both aircraft and missile systems that you'd associate them with. Their activity is very focused and aggressive because they have these local sourcing requirements. It's a great in with a terrific customer and we're uniquely positioned to serve that. Obviously in the U.S. there's other folks that can serve them as well, but these relationships take a while to develop and the technology takes a while to prove. Whether we prove it in the U.S., we prove it in Europe, or we prove it in Saudi Arabia, it all goes to the same endpoint.

In terms of the systems and applications, again I shouldn't talk about that for any customer. In that case it's all the normal kind of flight systems you would expect and the things that propel those flight systems, engines and rocket motors, things like that, are all fair game.

Jackson Schroeder (Research Analyst)

Got it. As an off topic follow up, maybe I missed this. Talking about cash generation for next year, could you touch more on CapEx expectations for that?

Jeffrey Graves (President and CEO)

Yeah, our CapEx, we are now able to throttle back on CapEx pretty nicely because we've made some significant investments in past years and our infrastructure needs don't evolve that quickly. We generally assemble products, we mix materials, they're not highly CapEx intensive manufacturing processes. That works in our favor. We have traditionally, if you drew a line through the past, said 4% of sales on CapEx is a good long term average. I would tell you over the next couple of years the number can be meaningfully below that because we've spent pretty heavily in the last several years on building out what we needed in terms of building infrastructure, stuff like that. 4% is a historic benchmark in a perfect world. Everything's growing, that's probably the level to model us at.

For the next couple of years, I would tell you we can get by with substantially less than that, probably less than half of that when we're still putting things together for 2026. We can get by with substantially less than that because again, the nature of our manufacturing operations, not very capital intensive.

Jackson Schroeder (Research Analyst)

Perfect. Appreciate the caller. Leave it at that.

Jeffrey Graves (President and CEO)

Okay, thanks for the question.

Operator (participant)

Thank you. As a reminder that star one to be placed into question queue, our next question today is coming from Alek Valero from Loop Capital Markets. Your line is now live.

Alek Valero (Equity Research Associate)

Hey guys, thanks for taking my question. So my first question is, I saw in the press release that you mentioned that the dental business is seeing more stability. I wanted to ask what is driving the dental business to stabilize. I also wanted to ask on monolithic dentures, I wanted to see if you could speak to the opportunity there and when we can possibly see it become a meaningful part of revenue.

Jeffrey Graves (President and CEO)

Yes, two good questions. On the first one, in terms of stabilization, obviously there are several. We have several revenue streams today in dentistry. One is our historic stream in materials to repair teeth, if you will, which is NextDent and Vertex. That market is consistent, it runs pretty consistently and we've got approvals in the U.S. and Europe for a long time. That's a pretty consistent performer. The volatility revenue stream, which is great, we love it, but it's more volatile, is the aligner revenue stream. You can follow that through public statements by the customers that we serve. That market fluctuates because in tougher economic times, some people, consumers view those as luxury items and they don't spend as much money on them.

There's also a number of different age groups that those OEMs try to serve, from younger folks to middle aged older folks. With the growth in video conferencing and stuff, straight teeth have become very popular and it also varies by geography. U.S., Europe, Asia, so we serve, we're a big provider in that market. I think we're the leader in providing printing technology and materials in that market by far. We kind of go, we kind of live with the volatility that encounters. If you want to understand the driver of that, you can easily, the public companies, you can easily tie into their earnings calls. I think what you would hear right now is that market has declined in the last couple of quarters, but is now stabilizing for them in terms of end product sales.

If you work back through the supply chain, it's consistent with our commentary on, we see revenue stabilizing in that market. You know, it continues to be a great business, it's stable now. Love to see it return to faster growth. We're, you know, we kind of live with that volatility, consumer spending. The denture part of your question is very interesting. Dentures today are, you know, largely handmade products. I'm sure the patients and the consumers of those products don't appreciate the labor content that goes into a denture historically. Whether you make teeth by machining, which is the common way to do it, or you print that, you try to print them, the assembly of the product has historically up until now been very much a hand operation.

If you walk through a dental lab, which is where these products are made, they're made regionally in the U.S. and Europe and they serve all the dentists around the city. If you walked into that lab, you would see a lot of people that are involved in some way in making and finishing dentures. Okay. Because it's labor intensive, some labs have chosen to ship the assembly operation to Asia to access lower cost labor. That is the way it's gone. That is all going to change now with digital dentistry. The scanners that dentists employ now are excellent. You can get a good scan of someone's, someone's teeth or their needs from their jaw construction. You can send that image to a lab.

Now, instead of being made by hand, you can 3D print a denture and you can print it in minutes and hours, not days. Okay, and finish it. It is beautiful, it is durable.

In many cases matches or exceeds current product standards. Within a year or two, it'll be the full spectrum of colors, performance, everything that people expect today will be embodied in these dentures. I'm thrilled with the product. I love the process because it takes enormous time and cost out of manufacturing. What the patient experiences at the end when they buy the denture is excellent. It wins on every front. The economics are absolutely compelling. What it's paced by, and this is, you know, where the rubber hits the road for investors is, okay, you talk about a billion dollar market. What has to happen to make that happen? We need to, we've got full regulatory approval in the United States. We need now to mimic that in Europe. We're working our way through. That'll happen in 2026.

We need then to have these dental labs try the manufacturing process and accept it and phase it in. I wish that process were faster, but it is. It is becoming a very sticky product. They like the product. They're going to ring it out and try and make sure their economics work. I'm very confident they do. I then will be selling a lot more machines. Our production rates are ramping. We've brought in inventory to make the product and the materials are fantastic. I expect revenues to continue to grow in that market. We want to access as much of that billion dollar market as we can because I think this beats any manufacturing process out there. We are also, because of requests, now seeking regulatory approval in Central and South America.

Several countries there would like to adopt the technology as well. Some of them use U.S. standards, some use European, some use a blend. Every country is different and takes some time to get through those. I have yet to see us ship a product to a lab and then say, wow, this does not work for me. Everybody that tries it loves the output of it right now. If there are any hesitations, it gets down to the details of the market they serve in terms of coloration, you know, gums and teeth. That varies by demographics, region of the world, all of that. There is a little more work to do on some areas of the market. Fantastic acceptance. We are excited about the growth and now it is just working through there.

All in all, dentistry for us, I think is going to be a great business. It already is. The repair materials will always be needed for caps and crowns and all of that. The aligner product is very well accepted. It may become a little bit more of a volatile market with consumer spending in some parts of the world, but it's great. It'll continue to consume a lot of material and printer investment, it is the most. It's the largest application for 3D printing today. Over a million of those are made per day through 3D printing because they're all unique to each person's teeth. Materials will be strong, aligners will be strong. For us, we're doing some really good work on night guards as well.

Obviously, the, and I would say direct printing of aligners to change both the markets they serve and the way the product's manufactured. We're doing some good work there. Of course, dentures is our biggest new growth initiative. Thank you for the question. I'm super excited about the product and the process, the acceptance. Look forward to updating you more in the future.

Alek Valero (Equity Research Associate)

Got it. I have a quick follow up, if that's okay.

Jeffrey Graves (President and CEO)

Sure.

Alek Valero (Equity Research Associate)

Yeah.

Jeffrey Graves (President and CEO)

I'll give you a short answer.

Alek Valero (Equity Research Associate)

Thank you. No, I was just going to ask on the denture opportunity, just digging a little deeper. Denture seems to be kind of like a more non-discretionary product where that if and when that initiative turns into revenue, would that become kind of like a more stable part of the dental revenue?

Jeffrey Graves (President and CEO)

Oh, yeah, absolutely. And that's a very good question. Absolutely. If you look at aligners, they truly for many people that buy them, they are discretionary. I mean a lot of people have very good teeth. They're discretionary objects. Although I would tell you the applications are expanding for aligners into folks that need more manipulation of teeth and beyond cosmetics for actual functionality of chewing stuff. That market is continuing to expand. Dentures are exactly what you said. They are in my mind an essential item to people, particularly in the developed countries and even in the non developed countries. It's one of the first things people want to and life expectancies continue to expand. You have an aging population.

There is more demand, if you will, for teeth replacement and this product wins both aesthetically and economically in addressing that need. It should be a more stable revenue stream, a growing revenue stream as the manufacturing is converted and because of the aging population and growing demand profile. We are thrilled by it. It is a great, I think it will be a great business for us. I think you will see dentistry for us be neck and neck with the balance of our healthcare business on orthopedics, be two of our largest and most valuable revenue streams in the future.

Alek Valero (Equity Research Associate)

Very helpful. Thank you.

Jeffrey Graves (President and CEO)

Thanks for the questions.

Operator (participant)

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

Jeffrey Graves (President and CEO)

Thank you all for calling this morning. We look forward to updating you again as we wrap up the year and report Q4 and full year results in the springtime. Thanks very much for the call.

Operator (participant)

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