3D Systems Corp (DDD) 2010 Q3 法說會逐字稿

Good morning and welcome to the 3D Systems conference call and audio webcast to discuss the results of the third quarter and first nine months of 2010.

My name is Christina and I will facilitate the audio portion of today's interactive broadcast.

(Operator instructions) At this time I would like to turn the call over to Stacey Witten with 3D Systems.

Good morning and welcome to 3D Systems conference call.

I'm Stacey Witten and with me on the call are Abe Reichental, our CEO; Damon Gregoire, our CFO; and Bob Grace, our General Counsel.

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 via the web at www.3DSystems.com/ir.

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 here on slide 3.

The phone numbers are also provided in the press release that we issued this morning.

For those who have accessed the streaming portion of the webcast, please be aware that there is a three second delay and that you will not be able to pose questions via the web.

Before we begin the discussion I would like to mention a statement regarding forward-looking information that appears on slide 4.

Certain statements made in this presentation that are not statements of historical or current facts are forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may include comments as to the Company's beliefs and expectations as to future events and trends affecting its business.

Forward-looking statements are based upon management's current expectations concerning future events and trends and are necessarily subject to uncertainties, many of which are outside the control of the Company.

Please also see forward-looking statements and perspectives that appear in the company's periodic filings with the Securities and Exchange Commission.

At this time I would like to introduce Abe Reichental, 3D Systems' President and CEO.

Good morning everyone and thanks for taking the time to listen to our call this morning.

As you know earlier today we released our operating results for the third quarter and first nine months of this year and filed our Form 10-Q with the Securities and Exchange Commission.

This morning Damon and I will review and discuss these operating results with you.

Let me begin by saying that we are very pleased with our continued strong performance and record third quarter results.

During the third quarter we earned $0.23 per share on a significant revenue increase and continued gross profit margin expansion compared to the third quarter of 2009.

And for the first nine months of this year we generated $18.5 million of cash from operations.

Reflecting on the quarterly and year-to-date progress we have made, we believe that our results are closing in on our long-term operating model targets.

Now for a more detailed look at our financial performance for the third quarter and first nine months of this year, I will turn the presentation over to Damon Gregoire, our Chief Financial Officer.

Damon?

Thanks Abe.

Good morning everyone.

The third quarter revenue increased 50% over the 2009 quarter and 18% sequentially.

This increase was led by a $7.7 million improvement in systems sales.

For the quarter gross margin expanded 90 basis points to 45.4% on a gross profit increase of $6.5 million compared to the 2009 quarter.

We also reported operating expenses of $13.7 million, bringing our operating expenses as a percentage of revenue down to 33% from 41% in Q3 of 2009, which is in line with our long-term operating model.

Net income of $5.4 million and earnings per share of $0.23 that included the negative impact of $0.02 per share from planned V-Flash ramp-up and a $0.08 per share from ongoing litigation activities.

For the first nine months, revenue increased 42% over 2009.

This increase was led by an $16.4 million improvement in system sales.

For the first nine months gross margin expanded 140 basis points to 45.4% on a gross profit increase of $15.5 million as compared to 2009.

We also reported operating expenses of $37.9 million, bringing our operating expenses as a percentage of revenue to 35% from 46% in the first nine months of 2009.

Net income of $10.1 million and diluted earnings per share of $0.43 that included the negative impact of $0.07 per share from the planned V-Flash ramp-up and $0.18 per share from ongoing litigation activities.

As you can clearly see on slide 10, the first nine months of this year we enjoyed significant revenue growth from all revenue buckets.

This was led by an increase in total system sales of 93%, driven by strong demand for our printers and production systems.

Service revenue increased 39% and included 3Dproparts sales of $11.5 million.

During the first nine months of this year materials revenue increased by 18%.

We achieved this growth absent some $0.9 million of service provider materials purchases that was included in our comparable 2009 revenue period but excluded this year as a result of acquiring and integrating these entities into our 3Dproparts business starting in October of 2009.

As a reminder, materials supplies to our 3Dproparts operations are treated as inter-company transfers and not included in revenue.

We believe that our revenue distribution across parts, printers and production systems and consumables speaks to the quality of our business model and its solid growth is validating the credibility of our long-term operating model.

We ended the September quarter with approximately $7 million in backlog compared to $1.4 million of backlog at December 31, 2009 and $1.7 million at September 30, 2009.

Although production and delivery of our systems is generally not characterized by long lead times, the current higher quarterly backlog included a multiple production systems order designated for future delivery.

Current backlog also includes $1.5 million of 3Dproparts orders that are scheduled for future delivery.

As shown on the previous slide, we're making excellent progress growing our lucrative healthcare solutions business.

In fact, healthcare solutions revenue grew 33% sequentially and made up 14% or $6 million of our total third quarter revenue compared to $4.5 million in the second quarter.

For the third quarter recurring revenue from materials and services represented 58% or $3.5 million of our total healthcare solutions revenue.

Healthcare solutions revenue consists of sales of systems, materials and services for hearing aids, dental and medical device applications and other healthcare applications and given the early stage of our healthcare solutions business development we expect that production systems quarterly revenue may fluctuate.

Improved revenue and sustained favorable impact from our cost and productivity initiatives resulted in a 90 basis point gross profit margin expansion over the comparable 2009 quarter, underscoring the sustainability of our gross profit improvements over the past seven successive quarters.

Revenue was positively impacted by 1.8% due to the change in foreign currency exchange rates compared to the second quarter of 2010; however, due to our strategy to match cost and revenue in the currency in which they occur, the impact to the gross profit margin was insignificant.

Sustained operating improvements enabled us to increase our net income from $0.9 million in Q3 of 2009 to $5.4 million in Q3 of 2010.

Net income for the third quarter of 2010 included $2.4 million of non-cash expenses primarily related to depreciation and amortization expense.

During the quarter we generated $11 million of net cash from operations, bringing our year-to-date total to $18.5 million.

We used $4.1 million to fund our strategic investing activities and finished the quarter with $33.8 million of available cash.

This represented an $8.9 million increase over our 2009 year-end cash balance and as of October 26th we had $25.4 million of cash available after using $11 million of cash for acquisition activities since September 30, 2010.

Our inventory balance at quarter end also decreased by $1.2 million to $20.8 million of net inventory.

On slide 13 we have broken out third quarter revenue as a percentage of sales by product category and region.

As you can see on the left, 65% of our total revenue for the quarter was generated from our higher margin recurring revenue bucket.

Materials revenue is our largest and most profitable revenue category and for the third quarter materials generated $14.2 million of revenue, representing an 8.5% increase over the third quarter of 2009 and 2% sequentially, after foregoing some $0.4 million of 2009 material sales to service providers that were acquired by us, integrated to our 3Dproparts business.

Service revenue for the quarter increased by $5.1 million compared to the third quarter of 2009 and included $5.3 million of sales from our 3Dproparts services.

Systems revenue increased by $7.7 million in the third quarter of 2010 from $6.8 million in the third quarter of 2009.

Sales of our 3D printers including ProJet and V-Flash increased by 74% over the 2009 quarter and 23% sequentially.

Consistent with our long-term operating model, for the first nine months 69% of our total revenue was generated from our higher margin recurring revenue bucket and now also includes $11.5 million from 3Dproparts.

Systems revenue increased by $16.4 million in the first nine months compared to the same period of 2009.

On a year-to-date basis production systems contributed $19.2 million of revenue and 3D printers $14.7 million, underscoring the healthy growth in both segments led by sales to healthcare, automotive and motor sports customers.

For the quarter gross profit improved by 53% over the 2009 quarter to $18.8 million; our gross profit margin for the quarter increased to 45.4% from 44.5% in the third quarter of 2009.

The sustained favorable impact from our cost savings and productivity improvement initiatives, coupled with improved overhead absorption from higher sales, more than offset less favorable systems and service mix.

As we previously announced, gross margin includes the negative impact of planned addition V-Flash ramp-up.

Importantly, although sequentially unit shipments of V-Flash nearly doubled, the negative impact on gross margin from V-Flash was reduced to a 1.2 percentage point impact during the quarter compared to a 2.3 percentage point impact in the second quarter.

We expect this impact to continue to decline and end altogether during the second quarter of 2011.

We were able to extend our trend of gross profit margin expansion during the third quarter.

Gross profit margin for the first nine months of 2010 increased 140 basis points to 45.4% compared to 44% in the same period of 2009.

Gross profit margin improved in the third quarter even though recurring revenue, which represents our highest margin component made up a smaller portion of total revenue.

While operating expenses increased some $2.5 million during the quarter as compared to the third quarter of 2009, operating expenses as a percentage of revenue decreased to 33% of revenue from 41%, consistent with our long-term operating model expectations.

Our operating expense increase reflects the higher sales commissions we incurred on higher revenue and the incremental operating costs we absorbed from newly acquired companies.

Higher legal costs for the quarter at $1.9 million were driven primarily by the timing and concentration of litigation activities associated with the DSM litigation as well as the Envision Tech litigation going to trial during the quarter.

As we discussed earlier, we were able to reduce our inventory by $1.2 million while improving customer fulfillment rates on increased revenue.

Our improved performance resulted in a reduction in our days inventory on hand to 84 days.

We believe that our continued focus on inventory management will result in a lower inventory level over time, notwithstanding the fact that we have increased in-house assembly operations substantially.

We are also very pleased with the quality of our receivables.

Our receivables balance increased $3.7 million to $26.6 million while we were able to maintain global days sales outstanding at 59 days.

The strong demand for our products and services, coupled with our financial and operational management has provided us the financial resources to enable us to pursue our growth strategy and opportunities.

And finally, for reference we have highlighted our third quarter and year-to-date results in relation to our long-term operating model.

As you can see, we believe that we are closing in on our long-term operating model, notwithstanding the negative drag from V-Flash and increased legal costs impacting SG&A.

I would like to remind everyone that this long-term operating model is not intended to constitute financial guidance related to the company's performance; it is based upon Management's current expectations concerning future events and trends and is necessarily subject to uncertainties.

That concludes my comments.

Abe?

Thanks Damon.

Before we begin the question and answer session I would like to spend a few minutes discussing with you our progress and future outlook.

During the course of the first nine months of this year we expanded our new 3Dproparts services organically and through acquisitions.

During the third quarter we acquired CEP, PROTOMETAL, (inaudible) and in early October we acquired Provel, our largest acquisition to date.

These acquisitions have enabled us to expand and enhance our 3Dproparts offerings domestically and in Europe, adding capabilities and capacity.

Early in October we also acquired Bits From Bytes, a game changing move designed to expand our 3D printer reach and technology breadth.

I'd like to point out that since September of last year we completed self-funded and successfully integrated into our operations 10 acquisitions.

We have done so primarily using internal resources and carried out the integration leveraging our existing infrastructure.

We will (inaudible) profitability to sustain this level of performance, positions us well for continued revenue growth and free cash flow generation.

We also continue to expand our healthcare solutions revenue and installed base.

We extended our reseller channel and increased 3D printer revenues some 74% over the comparable 2009 quarter.

I would like to take a moment and underscore the strategic significance of the Bits from Bytes acquisition that we made approximately three weeks ago.

As we stated previously, we believe that this acquisition benefits from significant synergies that in combination amplify their individual value.

As you already know, Bits from Bytes brings to the table a proven, simple technology with favorable marketplace acceptance and a strong marketplace following.

The 3D Systems this technology is completely complimentary in its capabilities, print output and price point and is engineered so that performance and cost satisfies emerging constituents.

3D Systems brings to this opportunity the breadth and depth of our printing technology and know-how that is required in the here and now by Bits from Bytes in order for us to jointly unleash the (inaudible) potential of this product line.

We believe that our core printing know-how and technology building blocks, together with our significant marketplace presence, empowered by our financial strengths and flexibility will result in reduced time to market for the introduction of additional new Bits from Bytes products and capabilities.

In (inaudible) they actually expect that our combined resources will result in accelerated growth not just for the Bits from Bytes segment but for our entire 3D printer product category as we develop new products under both brands.

Consistent with our ongoing approach to guidance, I would like to provide some color on revenue drivers for the fourth quarter of this year.

I'm pleased to share with you that we've entered the fourth quarter of this year with good momentum and a strong sales funnel.

Accordingly we expect 3D printer sales to continue to grow sequentially, helped by our expanding reseller channel and growing marketplace acceptance of our personal and professional printers.

We expect revenue from our 3Dproparts services to continue to grow globally, aided by our recent acquisitions and capacity investments and consistent with our earlier comments we also expect sales of our healthcare solutions to increase, benefiting from our expanding solutions portfolio and growing install base.

Reflecting on our strong growth drivers we expect continued revenue growth over prior year quarters and sequentially during the final quarter of this year.

Specifically we expect continued record 3D printer revenue growth driven by higher project, V-Flash and Bits from Bytes sales and consistent with our stated objectives we expect 3Dproparts revenues to reach between 16 and 20% of total revenue run-rate in the fourth quarter of this year.

Our gross profit margin is expected to remain stable despite the ongoing adverse systems mix in favor of lower margin printers.

The adverse impact of acquired businesses during the integration period and the continuous negative quarterly drag from V-Flash, although as Damon mentioned, we expect the impact of the V-Flash drag to decrease and to end altogether by the second quarter of 2011.

For the fourth quarter we expect SG&A to be in the range of $11 million to $12 million inclusive of higher litigation expenses as we currently understand them.

This range anticipates increased operating costs associated with 3Dproparts acquisitions we made thus far and higher sales expenses on commissions from higher revenue.

We expect fourth quarter R&D spending to remain in the range of $2.5 to $3 million while keeping pace with our planned new product introductions and we believe that we can further enhance our operational effectiveness and optimize our operating costs over time.

Finally, we believe that our business model is built on continuity from our growing recurring revenue component that helped generate improved margins.

We believe that a stronger sales funnel, together with the expansion of our 3Dproparts services and healthcare solutions, should result in significant recurring revenue opportunities.

We are very excited about our business prospects and will remain committed to our long-term growth objectives and we are confident in our ability to provide value to our customers and stockholders.

And with that we will now gladly take your questions.

We will now open the call to questions.

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 and A session.

As a reminder, please direct all questions to the teleconference portion of this call.

(Operator instructions) Our first question is from Brian Drab of William Blair & Company.

Congratulations on a great quarter.

As we move forward into the fourth quarter and next year, can you give us a sense for this type of revenue run-rate that we saw in the third quarter is sustainable or was there anything in the third quarter that would been in the category of large orders that might not repeat?

Just give us any sense for the revenue run rate.

I think that for the fourth quarter and I just mentioned that we expect to enjoy year-over-year growth and sequential growth in the fourth quarter, so that should give you some sense for the more immediate revenue generation opportunity.

I think it was notable in the revenue mix, and Damon talked to that is that we're beginning to see the maturation, if you will, of our new strategy that creates a much more (inaudible) and less heavily dependent revenue generation on any single bucket or on any single technology.

We're generating healthy revenue from production systems, we're enjoying record growth from our 3D printers, our materials revenue is growing nicely notwithstanding revenue that we have foregone as a result of acquiring service [bureaus].

And all together our 3Dproparts business is developing along the lines of ending the year at 15 to 20% of parts revenue as a percentage of total.

So all told, I think we have a very balance growth that certainly we see sustainable into the fourth quarter and we'll talk more about next year when we get to the fourth quarter results.

Great.

And then the backlog you mentioned about 7 million.

Do you expect to ship all of that?

I know you mentioned there is one large order or set of systems in that backlog.

Do you expect to ship that in the fourth quarter?

No, we don't expect to ship all of it in the fourth quarter but I will also remind you that we ended the second quarter of this year with fairly high backlog, I believe over 5 million and so the delta between the backlog that we exited the third quarter with and the backlog that we exited the second quarter with is only 2 million but it's trending in the right direction.

Great.

My last question would be around the acquisition of Bits from Bytes.

Can you talk a little bit about the motivation for that acquisition and is it to expand your presence into the education market or what do you see as the opportunity for them?

We see our motivation is in recognizing a completely complimentary technology and addressable marketplaces to what we are doing with our own 3D printers, that's number one.

Number two, understanding the potential of this technology to be developed into an up market, transitioning it from hobby, do it yourself (inaudible) and educators and into the design to manufacturing space and understanding that these guys not only developed very cost effective simple and attractive technology but that they have significant following in the spaces that they're addressing and incredible success that we want to learn from and benefit from, while bringing to bear financial and technology resources that they were starving for to unleash the potential within the spaces that they already address and other spaces that we want to address.

You put that all together, Brian and we have here an opportunity to really generate significant combined synergies out of this acquisition across the board.

Could you give us at least a rough idea of what sort of annual revenue that business was generating before the acquisition and what you think it could be?

The revenue from that acquisition was not really -- this is a company that has been in existence for about a year.

It was a startup.

In the first year of operation they have reached a level of shipment that according to (inaudible) amounted for about 17% of all printers shipped in that year.

The ASP for a printer that they ship was between $1,300 and $3,900 so revenue generation was not that significant or material in the first year.

The potential however, is very high over time and that's why we acquired them.

So, in terms of revenue we don't expect the Bits from Bytes revenue to significantly alter our revenue generation in the next few quarters but we expect it to contribute more significantly in subsequent quarters.

Your next question is from Jim Bartlett of Bartlett Investors.

Congratulations on just a terrific report in many many ways.

Let me ask, could you give us some idea of the organic growth in 3Dproparts so far this year?

And also you did give some indication of PROPARTS margin and service margin and if you'd make some comments about those two items as well.

In terms of organic growth from 3Dproparts it's at the rate that we estimate being between 25 and 30%; it's hard to be precise because of the rate of new acquisitions that come into the fold, but as we compare the performance of the acquired businesses this year versus their historical financials, we see that's kind of the growth range.

And in terms of margins, so far we see it as accretive to our corporate margin and improving over time as we integrate all of these businesses.

We have not yet broken the margin from 3Dproparts separately but we are seeing a very positive trend and margin improvement from that service.

Your next question is from Bill Gibson of Anderson Strudwick.

I've got a bigger picture question.

I noticed that Europe was up in what's normally a weak quarter historically.

The question is, with both production systems and proparts, what's your sense of the broader economy out there?

You're getting business across industry lines and lots of different areas; just want to sort of get your sense on how you feel about 2011.

It's hard for us to take our microcosm and translate it into financial predictions of the economy but I think that definitely reflecting on our own activities we are benefiting from the opportunity to be able to address same customers with either parts, printers and production systems and there is no question in our mind that we have created significant cross selling and up selling opportunities from the combined customer base that we now have.

And we also believe that it helps us in terms of the timing of certain purchases simply because companies now can decide to enter a project by sourcing parts from us immediately while they contemplate more significant investments down the road.

You put all that together, we're cautiously optimistic about 2011, but we're not in control of the European or global economy.

Let's go to the other end, which is V-Flash.

Is their material usage below expectations of what you thought when you originally discussed the product with analysts or are there trends there that people are using more material or what's going on with that?

We're actually pleased to confirm that the material consumption of V-Flash is in line with expectations and also in line with the combined 3D printer material revenue generation model that Damon and I shared in the last few investor meetings which I believe Damon, is around $12,000.

So it's in line and as Damon said in his remarks today, we also saw a significant up-tick in V-Flash demand during the quarter and the fact that shipments of V-Flash nearly doubled for the quarter.

So it's all coming in as we expected.

Your next question is from Jay Harris of Goldsmith & Harris.

Abe, you have to watch out -- we'll now come to expect these kinds of surprises from you in the future.

Well thank you for the gentle reminder.

When I compare the gross margin on the sequential incremental revenues, they're roughly 45%, roughly in line with the average for each of the two quarters.

In the remarks that were made, it's obvious that V-Flash is depressing margins however proparts are accretive to margins and therefore you have a higher percentage of proparts perhaps in the incremental revenues than in the base of the second quarter and the base of the third quarter.

And systems in general are running about 35% of revenues and they ought to be below corporate average for various reasons.

When do you expect materials and proparts margins to start to raise the margin levels that you're reporting on average?

I think that you have to look at a few things.

One, you correctly mentioned that V-Flash is still dragging, in the last quarter 1.2 percentage points, the previous quarter 2.3 percentage points, so if you factor that in, you begin to see margins rising already to very close to the first goal post in the long-term operating model which I think is around 48%.

The other thing that is important to recognize here and Damon touched on it in his prepared remarks, is that for this quarter, materials for example represented as a percentage of revenue a lower percentage for the quarter because of the significant demand that we had for systems and the increase in parts, etc.

So not withstanding some of this dilution and mix, the core growth profit margin still held which to us is a very healthy indication that suggests that the $150 million goal post of annual revenue we are closing in on the 48% gross profit margin.

The other thing that we also mentioned, Jay and I want to remind you again of is that for 3Dproparts (inaudible) every time when we make an acquisition we have a period of integration that also creates drag on margins for a period of time and as we do one of these every six or eight weeks or as we have done one of these every six or eight weeks, we are carrying that in the mix as well and that is trending in the positive direction as well.

So, to make a long story short, we're thoroughly confident in the validity of our long-term model and believe that as we close in on the first goal post we will reach the results and all the ratios that we talked about and we stand by that comment.

I wonder if I could get you to expand a little further, for instance, do you expect your -- if your rate of acquisition of proparts activities declines as a percentage of the total proparts business which I think is probably a valid assumption then is it going to take something like six months or 12 months on the base of a proparts business to get to your unstated objective, but still objective gross margins and at that point -- and where on a time scale do you think the material sales are going to start to be higher percentage of incremental revenues?

Let me try and make this simple and maybe Damon you can help me out here as well.

The long-term operating model that we put in front of you says that at annual revenues of $150 million we expect achieve 48%, at revenue levels of 200 million we expect to achieve 58.

And as we're closing in on those, you can see if you factor in everything that we spelled out in terms of what is dragging margin, we think the timing, not withstanding 3Dproparts acquisitions, the timing is such that (inaudible) within the goal post of expected revenue levels and we think that we're on the road to achieve it.

The timing on some of the negative drag on V -Flash should run out by the second quarter of 2011.

And we don't expect to slowdown our acquisition activities on 3Dproparts.

We expect to continue at this rate through the next 12 months.

But also extending that we expect to reach these targets that we set forth in our long-term model.

Keep up the good work.

Your next question is from Jim Bartlett of Bartlett Investors.

Could you help me understand the geographic breakdown?

I understand with Europe up significantly, how much of that was the acquisition and Asia was extremely strong, US, but then Germany was down.

Could you give a little flavor on that as well as Damon if you'd just sort of comment on what was the sequential foreign currency impact on revenue?

We did our acquisitions in France for this quarter so that impacted Europe but those are the only ones internationally that were done for the quarter so there was some impact to the service line from that.

The increases, again, our revenue throughout Europe -- it was pretty pan-European pretty strong, other Europe was stronger -- was a bigger increase than Germany, which is just showing that a lot of parts through our production systems and our printers were throughout Europe as opposed to last year's number which was more in Germany, so it's more level at this point -- more distributed.

And the impact to revenue from this quarter versus last quarter total was 1.8% positive impact.

So last quarter's exchange rates were about 1.8% higher because of the exchange rates this quarter.

But as I said too that if we get down to the gross margin number with how we try to match up our costs associated with sales with the currency that they're sold in, the impact on the gross margin was pretty insignificant, much less than 1 percentage point.

Great.

Can you give us some estimate on taxes as we go forward into 2011?

We're looking at our tax numbers and started to put some information in here.

We don't expect our cash taxes to change from what they have been but as we come close to the end of this year we are going to have to be looking at what our tax position is as far as the reserves we have on our NOLs and evaluating from the tax standpoint whether we have to release some of those.

As we get to be more profitable, have been more profitable this year, some of those gains due to our transfer pricing we pay in Europe and Asia, in the past when it was more close to breakeven or not making money, obviously we didn't have to pay taxes and we didn't have a tax rate in the United States.

Now we are using some of the NOLs, I believe it was a couple of million dollars worth of the NOLs as we became more profitable here.

Again, from a tax perspective and a cash perspective it's not going to change for a number of years.

From a release perspective we have to evaluate it in the next quarter or so.

Okay.

I guess you were successful with the InVision Tech trial but haven't done anything on that yet.

How much were the InVision Tech expenses during the quarter?

I'll answer on the trial and Damon can reflect on the expenses.

A jury trial was held between September 21st and 29th.

Following that trial the jury issued a verdict to the effect that InVision Tech vanquish machine infringes one of our patents and the court entered a judgment on that verdict on October 7th.

We have not yet sought to enforce the judgment but we believe that it is entitled to an injunction as a result of the judgment that was entered by the court and obviously we also intend to get into the damages phase here against InVision tech and that's where we are.

So we spent money on the trial, we got a favorable outcome to the extent that we did and we will report more on that after we allow the judge to manage the next phase of this case as the judge deems appropriate.

In terms of expenses, I don't know Damon to what extent you can comment.

The legal expenses this quarter were about $1.9 million which are about $900,000 higher than they were in the previous quarter.

We did not break out the cost between DFM and InVision Tech but it is safe to say that a portion of that increase was due to this trial.

(Operator instructions) There are no other questions at this time.

Thank you for joining us today and for your continuing support of 3D Systems.

A replay of this webcast will be made available after the call on the Investor Relations section of our website at www.3DSystems.com/ir.

This does conclude today's teleconference and webcast.