3D Systems Q4 Earnings Conference Call: Full Transcript

Operator: Good morning and welcome to the 3D Systems Conference Call and Audio Webcast to discuss the Results of the Fourth Quarter and Full year 2015. [Operator Instructions]. At this time, I would like to turn the call over to Ms. Stacey Witten, Vice President, Investor Relations for 3D Systems. Thank you Ms. Witten. You may now begin. Stacey Witten: Vice President, Investor Relations: Good morning and welcome to 3D Systems conference call. I am Stacey Witten and with me on the call are Andy Johnson, our Interim President and CEO and Chief Legal Officer; and Dave Styka, Executive Vice President and 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 at www.3dsystems.com/investor. Participants who would like to ask questions at the end of the session related to matters discussed in this conference call should call in using the phone numbers provided on the slide. The phone numbers are also provided in the press release that we issued this morning. For those who have access to the streaming portion of the webcast, please be aware that there may be a few-second delay and that you will not be able to post questions via the web. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and also in our filings with the SEC including our most recent Annual Report on Form 10-K. During this call, we will discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is available on our Investor Relations website, you will find additional disclosures regarding these non-GAAP measures including reconciliations of these measures with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2014. Now I will turn the call over to Andy Johnson, our Interim President and CEO. Andrew Johnson: Interim President & Chief Executive Officer, Chief Legal Officer and Secretary: Thanks Stacey, and good morning, everyone. Thank you for joining us today. Last few months can be characterized by our progress towards goals that we have identified as critical to our organizational advancement, profitability, and long-term sustainable growth. We are undertaking an extensive review of the company and our strategy. We are taking steps to better prioritize our resources and reduce costs. We are taking targeted measures that include the consolidation of facilities, headcount reduction and company-wide synergies. At the same time, we are investing in areas that we believe our meaningful opportunities in professional and industrial verticals. In December we made a significant step with our shift away from consumer activities including the end of life of the Q3 and the discontinuation of cubify.com. This was a clear demonstration of our commitment to prioritize our resources towards meeting real customer demand in the market place. Then in January, we launched the ProX DMP 320, a high-precision high-throughput printer designed for complex metal parts in titanium, stainless steel, and nickel super alloys. The 320 is a powerful and reliable system and we believe it gives us a strong foothold in key metals applications ranging from healthcare to industrial manufacturing, to service center production. We are also introducing additional new products that extend our price points and capabilities from the product design lab to the factory floor, including the ProJet MJP 3600 and the ProJet MJP 2500. We showed our continued commitment to innovation through the demonstration of our Figure 4 SLA technology at CES earlier this year. One of the features of Figure 4 is that it can be housed in discreet modules allowing it to be integrated into an automated manufacturing environment at a scale of one up to a larger 100s. It is also capable of manufacturing parts from hybrid materials that are tough, durable, temperature resistant, and elastomeric. And just last week we celebrated the opening of our Healthcare Technology Center in Denver, Colorado, a state-of-the-art facility that serves as a central hub all our healthcare activities, from surgical simulation to virtual surgical planning to device design and manufacturing. Maintaining a competitive product portfolio to meet evolving market demand is a top priority for us and we are reviewing each of our product lines and business activities. We believe that a comprehensive review of our business and strategy is necessary to our success particularly as we face continued uncertainty in the market. We are proudly in the midst of this extensive business review. The Executive Management Committee, which as a reminder includes Chuck Hull, our Founder, Director and Chief Technology Officer who chose the committee; Dave Styka, our Chief Financial Officer; Mark Wright our Chief Operating Officer; and myself, continues to provide oversight and guidance in day to day operations in review of the company's strategy. Our leadership team and employees throughout the company have stepped up and are contributing to delivering improvements while ensuring the effectiveness of our operations company-wide. Our commitment to quality in our people, processes and products has been apparent internally for the last several months. The Executive Management Committee has been building a culture based on transparency, accountability, and collaboration within our organization. This is manifesting itself in continual business process improvement and enhanced new product launches and overall customer experience. We believe quality in people, business processes and products will help drive customer and employee satisfaction and improve productivity and business results. Additionally, we kicked off our comprehensive partner program, Partner Excel at a global partner summit in January. Both Partner Excel and the Summit itself reflect the commitments and investments we are making in our partners and in our sales organization as well as the commitments our partners are making in 3D Systems. I believe our partners and our internal sales team walked away from the summit with the renewed sense of trust, appreciation, and confidence, in our partner model and in our company. Meanwhile, our Board of Directors is continuing the process to name a permanent CEO and the search committee is pleased with the progress to-date. Although we are in a transitional period, we are not sitting still. We recognize that developments in our industry have brought heightened competition and new challenges but there are also significant and exciting opportunities. We are taking steps to position ourselves to capitalize on those opportunities through a comprehensive review of our products, activities, and strategy. And With that, I'd like to turn to an overview of fourth quarter results. Revenue decreased 2% from the fourth quarter of 2014 to $183.4 million. We are pleased with our revenue in the fourth quarter of 2015 which benefited from the timing of orders from healthcare and industrial customers as well as contributions from acquisitions. Despite our 21% sequential improvement in revenue, industry conditions remain challenging and we may continue to experience uneven demand in the coming periods. Gross profit margin decreased to 32.8% driven by the impact of charges related to our shift away from consumer. Excluding those charges, gross profit margin was 47.7% compared to 47.9% in the fourth quarter of 2014. Cash operating expenses of $66.7 million remained flat sequentially. We reported a fourth quarter GAAP net loss of $596.4 million, a loss of $5.32 per share and a non-GAAP net income of $20.9 million or $0.19 earnings per share. Now I'd like to turn the call over to our CFO, Dave Styka, for more details on these results. Dave David Styka: Chief Financial Officer: Thanks Andy. Good morning, everyone. For the fourth quarter of 2015, our revenue decreased 2% to $183.4 million, operating expenses of $626.1 million including impairment charge of $537.2 million, $22.4 million of R&D expenditures, and $66.5 million of SG&A expenses. We reported a GAAP loss of $5.32 per share and non-GAAP earnings of $0.19 per share. For the full year, we reported revenue of $666.2 million, an increase of 2% over 2014. We reported a GAAP loss of $655.5 million or $5.85 per share. For the full year, our GAAP net loss included $537.2 million of goodwill and intangibles impairment charges, a $27.49 charge related to consumer inventory and purchase commitments, and $11.3 million expense for an arbitration award as well as $61.1 million of amortization expenses, $34.7 million of stock-based compensation expense, and $9.3 million of acquisition and severance expenses. The consumer related charges were comprised of an $18.6 million non-cash inventory write-down and $8.8 million of cash expenses to exit purchase commitments that both negatively impacted gross profit margin. Excluding these charges, gross profit margin for the fourth quarter was 47.7%. Non-GAAP operating expenses increased 33% to $280.5 million for the full year resulting in non-GAAP earnings of $30 million or $0.27 per share for the year. Challenging conditions continued into the fourth quarter contributing to lower 3D printer sales compared to the fourth quarter of 2014. This also negatively impacted sales and materials. Professional industrial printer units decreased 41% for the year and printer's revenue decreased 26% for the year to $168.7 million. Notwithstanding these pressures, there were some positive indicators in the fourth quarter. Orders by healthcare and industrial customers supported printers and materials revenue, stronger SLA, SLS and DMT sales to over 4% sequential increase in printer units and a 58% sequential increase in printer's revenue. For the full year revenue from healthcare and related applications contributed $141.1 million, an increase of 9% from 2014. Healthcare revenue growth was driven by our broader range of products and services as well as expansion by customers printing medical and dental devices. Software contributed $78.1 million in 2015. The addition of Cimatron in early 2015 drove a 121% increase in software revenue for the year. Consumer revenue grew 7% for the year to $46.5 million driven by the contribution from Gentle Giant and the 2014 backlog of two 3D printers that were shipped in 2015. Revenue related to consumer products and services that are being discontinued, comprised approximately $20 million of this revenue in 2015. Going forward, since we are shifted away from the consumer category, we will no longer be providing o consumer revenue in number. Revenue from Cube Pro and Gentle Giant will be included in our overall products materials and services categories. For the full year, products revenue decreased 9% and materials revenue decreased 5% both primarily as a result of lower printer sales in 2015. Services revenue increased 22% from growth in healthcare and software, including the contributions from acquisitions. Revenue from the Americas increased 7%, EMEA revenue increased 2%, and revenue from APAC decreased 13%. Revenue in global markets was negatively impacted by lower printer sales and foreign currency rates. Gross profit margin for the quarter was 32.8% compared to 47.9% in the fourth quarter of 2014. As we mentioned earlier, this decrease is primarily related to consumer including charges for a foreign inventory write-down in canceling purchase commitments that were recorded in the products category in the fourth quarter. Without the impact of these charges, products gross profit margin was 30.2% for the year and consolidated gross profit margin was 47.9% for the full year. Excluding the total impact of discontinued consumer products and services, full year gross profit margin was 50%. In the fourth quarter, we recorded charges of $443.7 million related to goodwill and $93.5 million related to intangible assets. Excluding these non-cash impairment charges, GAAP operating expenses increased $3.4 million compared to last year from higher SG&A expenses. Compared to the fourth quarter of 2014, SG&A increased from acquired expenses including higher compensation, depreciation, and amortization expenses. R&D remained flat at $22.4 million inclusive of acquired business R&D expenditures. Excluding the impairment charges, operating expenses decreased $16.7 million sequentially to $88.9 million primarily related to the third quarter $11.3 million non-cash arbitration award expense and lower amortization in the fourth quarter in connection with the impairment of intangible assets. R&D expenses were flat sequentially. Cash operating expenses of $66.7 million were flat sequentially on higher revenue. We have consolidated several facilities globally and have begun to realize the cost reductions from these actions. We are currently in the process of closing the Andover facilities in the US, consolidating these locations into Rock Hill, Tulsa. As a result of the impairment of intangible assets that we recorded in the fourth quarter, we expect a 42% reduction in amortization expense to $35.1 million in 2016. During the quarter, we generated $7.5 million of cash from operations. For the year we used $3.1 million of cash in operations. We exited the year with $155.6 million of cash on hand and we have not used any of our $150 million revolving credit facility. We ended the December quarter with $105.9 million in inventory, $32.3 million or 23% reduction sequentially. In addition to the $18.6 million inventory write-down related to our shift away from consumer, we have made improvements with our planning and procurement processes to reduce and better manage inventory. We estimate that the inventory held by our channel partners at the end of the fourth quarter decreased sequentially to approximately 2% of fourth quarter revenue. Backlog decreased 5% sequentially to $38.4 million as of December 31 primarily due to timing of order placement and fulfillment across all categories. We were pleased with our fourth quarter revenue; however we want to reiterate that industry conditions remain challenging and demand maybe uneven in the coming periods. We are taking steps to reduce costs and better prioritize our resources to targeted measures that include the consolidation of facilities, headcount reductions, and companywide synergies. At the same time, we are investing in products and service related to key verticals that we believe represent meaningful opportunities to us. We shifted away from consumer products and services at the end of the year, a discontinued consumer activities contributed approximately $20 million of operating expenses in 2015. We are currently evaluating how much of this we will redeploy as investments into other areas. As we continue our comprehensive review of our business and strategy, we are committed to taking the necessary steps to foster long-term sustainable growth and improve profitability. And now I'd like to turn the call back to Stacey, who'll open the floor for questions. Stacey? Question & Answer Stacey Witten: We'll now open the call for questions. I'd like to remind everyone that your line will be muted after your first question and we kindly request that you ask one question at a time and then return to the queue thus allowing others to participate in the Q&A session. As a reminder, please direct all questions to the teleconference portion of this call. The telephone numbers are provided again on the slide. If you are calling inside the US, the number is 1-877-407-8291; and if you are calling outside the US, the number is 1-201-689-8345. Operator: Thank you. [Operator Instructions]. Our first question is from Ben Hearnsberger of Stephens. Please go ahead. Ben Hearnsberger: Stephens Inc.: Hey, thanks for taking my question. I wanted to ask one on non-GAAP OpEx. It sounds like you're continuing to take out costs, drive efficiency in the organization. Should we assume non-GAAP OpEx continues the trend lower from the number we saw in 4Q? David Styka: Hey Ben, this is Dave Styka. Yes, and thanks for taking the time to kind of listen and call in. Yes, I do believe that non-GAAP OpEx is going to be reduced as I've indicated to everybody previously, where we see cash OpEx is flat to down as we go through 2016 and I believe the non-GAAP portion is low and is going to be declining throughout the period. Operator: Thank you. The next question is from Sherri Scribner of Deutsche Bank. Please go ahead. Sherri Scribner: Deutsche Bank: Hi, thank you. I just wanted to get a sense of the demand environment. I know you mentioned that it's challenging. Can you give us some sense of where you're seeing the challenges and then in terms of the consumer business, do you think there is any impact to your industrial business from exiting the consumer, do you see those as totally separate? Thanks. David Styka: Yes, Sherri, this is Dave Styka. I will pick up the first part of that and I ask if want to jump in. We do see demand right now. The best way I would characterize Q3 to Q4 is lot of volatility. There is still un-clearness and not great visibility and everything. However, we do kind of believe that demand that kind of lookout over 2016, I see it maybe up a little bit to flat but I don't see any big spikes in it but I do still see a lot of uneasiness and volatility in it. Stacey Witten: Then on the consumer piece of it as we started the end of December we shifted away from consumer. We're currently in the process of combining the channel afford that's top-end professional and see some opportunities to achieve synergies and strengthen our channel management team through that and it's another step in prioritizing our resources and we are looking at where the real market opportunities are and our product portfolio to address those. Operator: Thank you. The next question is from Jim Ricchiuti of Needham and Company. Please go ahead. Jim Ricchiuti: Needham and Company: Thank you. Just with respect to the quarter we're in right now. Couple of weeks from the end of the quarter can you give us some better sense to you talk about challenging demand environment would you anticipate that excluding the consumer business from last year. That the business could be up versus year ago or flat. Stacey Witten: So the consumer business by share and just to remind we actually thought it discontinued pieces we're about $20 million of 2015 revenue and just last year if you look back at Q1 consumer was a bigger piece in Q1 because of the backlog that we came into 2015 with. So, and we haven't talked about Q1 expectations for this year but a couple of things I guess put some color around where the differences are in the business today versus last year. Operator: Thank you, and the next question is from Bobby Burleson of Canaccord Genuity. Please go ahead. Bobby Burleson: Canaccord Genuity: Hey, good morning. Thanks for taking my question. I am just curious in terms of the Q4 consequential popping I saw in demand. How much of that do you think was catch-up spending customers that waiting on some of the quality issues or just cautioned on CapEx and how much of that is kind of a real resumption of organic demand in your mind? David Styka: Yes, so. Hey Bobby, this is Dave again. The fourth quarter, yes, we did see that there were some larger orders from health care industrial customers as really where we saw. Some probably a little more robustness and we kind of had anticipated, but overall, I think we were saw a meaningful improvement just kind of across the board, we talked about our SLA or SLF, technologies all being up 21%. So, I think we saw some investments across our platforms, I don't think there was a large extra budget for us, I do recognized in the fourth quarter, you do see some of that but I think we would have a good quarter anyway even without the impact of, and the other thing that I would say though is again I think as we kind of set comment Q3, Q4 lot of volatility, uneven demand. I wouldn't want to say that we can have run rate I want everybody to be clear on that but there is a lot unevenness going on in the marketplace and there is lot of challenges so. Operator: Thank you. The next question is from Hendi Susanto, Gabelli & Company go ahead. Hendi Susanto: Gabelli & Company: Good morning Andy and David. Andy and David I have a question. So you mentioned that you will be combining channels for desktop and professionals, could you elaborate on that maybe in-terms of the time -- in terms of the time frame and then how many channels you have for desktop, how many channels for professionals and then, sounds like you made, what the number of combined channels would be? Andrew Johnson: Sure this is Andy, I will speak a little bit this is sort of piggy back software on what Stacy, commented on a few movements ago. We talked in the third quarter about the fact that we were focused on an engineering and educational go-to market strategy and we've talked for several months sense the best way to do that. Well at one point, some of our taking may have been too, establish two separate channels, we've talked about bringing synergies across the Company and we've done a lot of work under Mark Wright's guidance to actually take a go-to market approach with in our printer channels. So we're in the midst of enhancing the true printers channels, we're not going to establish a separate education channel and we'll work to train our direct sellers as well as our resellers within the printer's channel in how to sell into engineering and educational applications, which we still see as an opportunity for near-term profitability and particular our CubePro Trio is an excellent product in the educational space and we're seeing some real adoption there. So, it's the core printer's channels and we're working on some enhancements to the channel now. Hendi Susanto: Thank you. Operator: Thank you. The next question is from Jay Harris of Axiom Capital Management. Please go ahead. Jay Harris: Axiom Capital Management: In your formal remarks you indicated that material sales were down because of new -- the absence of new printer sales in the like quantity. I'd like to hear you talk a little about the material sales from the installed base obviously they were would down in '16 were they up in any of the prior years? Stacey Witten: Material utilization and there is a couple of things that going in that, one is the printer in sales level then obviously Q3 there was lot of impact from lower printer sales, also there is pretty large FX impact over the year I think it was about $9 to $10 million FX impact which if you exclude that materials revenue would have been up. So tiny materials sales fluctuate throughout the year, we saw pretty consistent utilization in cost installed, we saw some improvements in Q4 in some HealthCare industrial customer base customers but fluctuating but we are seeing consistent utilization across the large customer base. Operator: Thank you. The next question is from Patrick Newton of Stifel. Patrick Newton: Stifel: Yes, Andy, Dave, Stacy, thanks for taking my question. Number one, I want a clarification and then my question the clarification is I wanted to hear, make sure I heard this correctly. Did you say that the lost in a revenue from shutting down entry level of Cube platform and Cube was $20 million in revenue and then this such a cost us $29 million. Then my question on the revenue side is, is it still right to think that the first half versus second half seasonality is kind of 46, 54 as otherwise where to look at revenue and then is it also right to think that borrowing any M&A that 2Q through 4Q of 2016 would be pure organic revenue as you allowed this Cimatron purchase. Thank you. Stacey Witten: So to the consumer question first, we saw a date that the discontinued consumer products contributed about $20 million of revenue to 2015, on the expenses side, we said that, it also was about $20 million of operating expenses of those we are looking at right now how much we want to redeploy to other investments and other areas and how much might be savings in cost reduction, so that's. Andrew Johnson: So just to clarify, it was $20 million at the cost side, not $29 million Patrick. David Styka: So and the next part with respect to your revenue question was you're kind of break in revenue, I had go back to the lack of visibility, I think historically I wouldn't give anything different than it seems historically, I think that's a fair way to kind of evaluate Patrick and reasonably I mean the amounts are pretty similar anyway, I think that's a reasonable way to look at it. But I would say given the challenging environment and the lack of visibility, I wouldn't go out and say anything it's significantly change in the marketplace, I don't have anything that would tell me, give me any more visibility one way or the other. Stacey Witten: And the organic piece, you're right, as we get into April, is that everything what said the China acquisition was early April in '15. Operator: Thank you, the next question is from Brian Drab of William Blair. Please go ahead. Brian Drab: William Blair: Good morning thanks for taking my question and I just want to get a better sense if I could on revenue for fourth quarter and first quarter '16, you know the fourth quarter, can you talk at any more about the magnitude of these orders in healthcare and industrial, that gave you the tailwind in the quarter maybe was that more or last than say $15 million and then in the first quarter, you always have the seasonal down-tick and I'm wondering if you can talk about your expectations also given that where 10 weeks into the quarter, we're going to see the kind of seasonal downtick that we've seen in the past last year it were down 14% from fourth quarter to first quarter? Thanks. Stacey Witten: We haven't quantified what really the contribution was in Q4 and we just wanted to make sure that our sense there was some benefit from smaller to healthcare industrial customers it's not necessarily a new run rate of any kind and that there were few features that played into that some of the normal year and timing typical, some of the that people had how some purchases earlier in the year and then some healthcare and industrial expanding our operations and the timing there. So came right but trying to give a little color there as far as seasonality in Q1 I don't see that there is any reason that you would expect anything different than we've seen in past years as to the exact quantity or percentage we haven't gotten any of that. Operator: Thank you. The next question is from Kenne Wong of Citi Group. Please go ahead. Kenne Wong: Citi Group: Hi guys. So you guys mentioned a refocusing of efforts on key markets and products and when I think about your recent announcement of the State-of-the-Art HealthCare technology center is that what we should be expecting from you guys going forward on some of your other key verticals like aerospace and auto, and dental should are you guys going to have centers of excellence for those particular verticals as well. Andrew Johnson: Thank you for the question. This is Andy. Absolutely we view our 4A and 2A a true precision HealthCare hub in Denver and HealthCare as a template as we get deeper into vertical applications, there is no question that both do organic work as well as acquisition we've established quite a strong vertical presence into healthcare. When we talk about other verticals, we do talk regularly about aerospace, automotive and as we get further into those we'll looked what we've done in Denver as a format and how to build verticals. So, I think that's absolutely terrible and we're doing a lot more of that as we position the company more and more as a company that is built on the importance of rapid prototyping clearly we view our SLA technology as the heart of rapid prototyping but we will become more and more an end used manufacturing company, in order to do that we're going to have built more vertical expertise. Operator: Thank you. The next question is from Wamsi Mohan of BMO. Please go ahead. Wamsi Mohan: Bank of America: Hi this is Wamsi from Bank of America. Is actually Ruplu filling in for Wamsi, he is on travel today. I have a quick question with respect to the services margins there is seems to have been a significant declined sequentially as well as year-on-year. Could you just talk about some of the factors that went into that? Stacey Witten: On the services side, what makes of the services piece is software services, printer services, medical services and then on to end parts business and there is, the two pieces that pressure on margins there one is as we worked through the quality issues on some of the printer this year, you know, that warranty of maintenance work getting into that service margin category and on the important side as we have all of the acquisitions together and looked at the types of customers and then the jobs and the work that we're doing there has been some areas where we have acquired lower margin business and it takes some time to work through, some of those contracts and those agreements are in place and really built out the kind of business that we want to have there. Operator: Thank you. Our next question is from Ananda Baruah of Brean Capital. Please go ahead. Ananda Baruah: Brean Capital: Hey thanks for taking the question. Andy, Dave and I guess even Stacy on this one. I guess Andy in the context of your question, of your comment about, you know sort of demand as you go through this year been flat but there may be a bit choppy, when would you guys expect to have, you know I guess critical massive of you and you wanted to, what the cost structure looks like, you know in the margin structure. Such that you can provide some visibility to us, you know that would allow us to kind to go ahead and think about what normalized could look like for you guys, not necessary on the top-line, that at least on the cost structure side and, I'm really just trying to get my , what kind of mechanics you guys are working with as when that whole thing kind of that's for you? Thanks. Andrew Johnson: Sure thanks for the question. I'll start this is Andy and I'll probably turn to David, to talk a little bit as well. We talked about a strategic review that we'll undertaking right now, that begin earnest in the fall and continues when the midst of it it's been a very fruit full exercise and we believe that we have several more months of analysis around our business our strategy our processes, it's been a very beneficial exercise, it's not yet complete, as we completed we'll be talking much more about it and sort of how that impacts our view of the remaining part of the year, that will go in the margin, that will go to operating expense the sorts of things that we can control. But we're in the midst to that actually That were limits to that exercise right now and as such we are not providing any sort of guidance at this point, but we will be talking to you in the next couple period as we reach our conclusions and excellent decisions. David Styka: Yes, Ananda and I guess the only thing that I would kind of highlight is as we kind have indicated we are still actively working on managing our cash our inventory levels cash up that is a big metric that we're really looking at here and one of the things I want to kind of call out the people was one of the thing that we've said we are going to do is facilities consolidation, headcount reduction, across rationalization you're seeing that happen not only in our facilities our facilities. So we are actually working through all of that as we go through it but whole rest the big plan of any big strategic changes that still to come but that not prohibiting us from today being very aggressive and active in all that cash and inventory management. Operator: Thank you. As a reminder ladies and gentlemen it is star, one if you would like to ask the question. The next question is from Jason North of Jefferies. Please go ahead. Jason North: Jefferies: Hi, I was wondering for the impact of the discontinued consumables on the gross margins as any general thoughts you had on the gross margins for the peer side going forward? Stacey Witten: On the gross margin, so we haven't put any guidance expectations to say earlier on the future but if you look at where we were in 2016. The products gross profit margin, if you exclude from the consumers fairly consistent over the last couple of quarters and we on a consolidated basis on excluding the one-time consumer impact it was totaled 47.7 for the quarter and 47.9 for the year, so great in the same range as we have been. Operator: Thank you. The next question is from Jim Ricchiuti of Needham & Company. Please go ahead. Jim Ricchiuti: Needham & Company: It looks like based on what you've said you did health care revenue of about $141 million, I think I heard you say so, isn't based on that your health care business down again for Q4 looks like around 3%. So, you had two quarters now of year-over-year declined in the healthcare, check of the business, can you talk a little bit about that is that competitive when would you anticipate that to earn? Stacey Witten: Thank you Jim. We've talked about the healthcare and you know, one of the drivers of that has really coincided with the printer's immaterial business and just the timing of some of the orders there and like we've seen in some of the industrial areas customer to are expanding Andy's obligation parts in Franc, guides things of that nature are growing other few are doing some of the and prototyping are growing and as much. So, that's all same kinds of things that are planned into that healthcare business and we still believe that over the long-term that is to get a growth area for us if you look at the year it has grown and we've about as we talks about the investments we're making and you see about healthcare customers making investments and that said the 3D print provides solid applications. Andrew Johnson: The other thing Jim that I call it as I think the Denver facility is going to be a good launching point for us the capital market in different ways with more holistic approach be able to be more aggressive as we go to market in our healthcare areas as well. Operator: Thank you. This does end the question-and-answer portion of today's conference. I'd like to turn the conference back over to Stacey Witten. Stacey? Stacey Witten: Thank you for joining us today, and for your continued support of 3D Systems. A replay of this webcast will be made available after the call, on the Investor Relations section of our website www.3dsystems.com/investor. Operator: Thank you. Ladies and gentlemen this does today's teleconference you may disconnect your lines at this time and thank you for your participation.