Greetings, and welcome to the 3D Systems Third Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Mick McCloskey, Vice President, Investor Relations. Please go ahead, Mick.

Hello, and welcome to 3D Systems' third quarter 2024 conference call. With me on today's call are Dr. Jeffrey Graves, President and CEO, and Jeff Creech, EVP and 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 this presentation may do so on the Investor Relations section of our website. The following discussion and responses to your questions reflect management's views as of today only and will include forward-looking statements as described on this slide. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our latest press release and our recent filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During this call, we will discuss certain non-GAAP measures. In our press release and slides accompanying this webcast, you'll 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 2023. With that, I'll turn the call over to our CEO, Jeff Graves, for opening remarks.

Thank you, Mick, and good morning, everyone. Today, I'll begin with an overview of our third quarter results and then touch on some recent key accomplishments and announcements. I'll then ask our CFO, Jeff Creech, to take us through the Q3 in greater detail before closing the call with comments on our outlook, after which we're happy to take questions. So let's start on Slide 5. At a high level, our third quarter revenue largely represents a continuation of the trends that we and the additive industry broadly have been contending with for several quarters now. Very simply, macroeconomic and geopolitical uncertainties have caused our customers to reduce CapEx spending for new capacity in their factories, which in turn has created a persistent headwind to hardware system sales. It's really that simple. As a consequence, our revenues were essentially flat on a sequential basis. This was slightly weaker than we had anticipated as a few key installations of new systems, which were targeted for acceptance late in Q3, slipped into the fourth quarter. However, while the sale of new printing systems is still sluggish, what is changing for the better is the utilization rate of our installed base, as indicated by rising sales of consumables to our customers. Consumable materials grew approximately 10% from the prior year and demonstrated sustained sequential growth, a trajectory that has consistently improved since the beginning of the year, most recently growing 9% sequentially in the third quarter versus Q2. In a similar vein, interest in new application development has been on a very robust trajectory. As many of you know, we have one of the largest and most capable application engineering groups in the world. These engineers work directly with our customers on new applications for both metal and polymer 3D printing. Year-to-date, revenues…

Thank you, Jeff, and good morning everyone. I'll begin with our revenue summary on Slide 8. Third quarter revenues of $112.9 million declined 9% from prior year, driven primarily by a continuation of macroeconomic pressures, impacting hardware system sales partially offset by growth in material sales. On a sequential basis, revenues were roughly flat and impacted by a few large dollar orders that fell outside of our third quarter close. Within our segments, industrial revenues were $57.9 million and down about 19%, predominantly driven mostly by a decline in printer sales. In our health care segment, revenues were $55.1 million for the quarter and grew 5% from prior year. As Jeff just mentioned, growth in the third quarter was primarily driven by a healthy rebound in dental and our personalized health care business. Now let's turn to Slide 9. Non-GAAP gross margin for the third quarter was 37.6% and included an increase in inventory obsolescence reserves taken in the quarter, representing approximately $3 million. Normalizing for the impact related to inventory reserves would result in a margin of 40.2% for the third quarter. Comparing to prior year, margin was 44.8%, which included a significant benefit of regenerative medicine milestone revenue recognition. Excluding the impacts of inventory reserve increases and the milestone recognition in the current and prior quarters, respectively, gross margins would have been 40.2% and 42.7%, with a year-on-year decline primarily driven by unfavorable absorption given lower sales volumes. Now let's move to Slide 10 for operating expense. Non-GAAP operating expense for the third quarter was $61.4 million, increasing $5.6 million from prior year, but declining $2.7 million consecutively, in line with our expectations. As an important reminder, the prior year quarter comparison benefited from a tailwind associated with lower incentive compensation expense in addition to other benefits that…

Thanks Jeff. So we believe that the broader macro trends negatively impacting our industry to the greatest extent are beginning now to move behind us. With our strong cash position we've been able to maintain our core investments for the future, while consistently restructuring our company to maximize operating efficiencies. Our determination to support key R&D investments are fundamentally different from many others in the industry, and we believe position us well for accelerated growth and profitability as our end markets inevitably strengthen. While we will not be providing explicit comments on 2025 yet, looking beyond this year, as much of our critical R&D work is behind us. We will continue to evaluate incremental actions that can strategically remove costs from our business and drive sustainable profitability. In doing so, I believe we'll deliver meaningful value to all of our stakeholders. So with that, we'll now open the line for questions. Kevin, if you'd open the line for us, please.

Certainly. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Jim Ricchiuti from Needham & Company. Your line is now live.

Hi, good morning. So I'm looking at your implied revenue guidance for Q4, it's a little surprising with only a month left in the quarter that there's a relatively wide range of scenarios. And I'm hoping you could help us understand what's driving that? I mean, it sounds like potentially, some of your customers may be working through inventories and maybe that's on the material side. But maybe if you could help us understand that a little and then I have a quick follow-up.

Yes, Jim, I think there's two factors. One of it clearly is inventory management from our customers. They're in good shape, but they want to make sure they don't get out over their skis with the - all the changes coming in ‘25 with the -- in the political environment and the geopolitical issues. I think nobody wants to be overly exposed on inventories. So I don't think it's a massive problem, but it's certainly they'll be managing them customer by customer. The big unknown, Jim, is really how much CapEx they'll be willing to spend in the fourth quarter and at what rate. Even if they cut loose CapEx late in the quarter, as we saw in Q3, some of those installations aren't then completed until the following quarter, which delays revenue recognition on many of them. So there can be a timing issue on their capital spend. In normal times, they try to -- a lot of them would try to spend their capital up in the fourth quarter and get it done as early as possible for planning. Right now what we're seeing is a bit of trepidation, a bit of slowness in issuing POs. I expect this quarter to certainly be up, and but not quite, if I had to guess, Jim, not quite in line with historical norms. But there is some upside for us versus our midpoint. But given that Q3, there was some slippage at the end of the quarter, into the following quarter. I just don't want us to get out ahead of ourselves. So that's why you'd see a little bit of a wider range and a little bit more modesty, if you will, on the growth rate in Q4. So we believe it'll be up, and up nicely for the quarter. But CapEx inventory management are just unknowns, and we want to buffer for those.

Okay.

Does that make sense?

It's helpful. And maybe we could just turn to gross margins, because the guidance for the year, I guess 38%, 40%. Again, a little surprising given that your nine-month gross margin was 39.5%. Is this all a case of unfavorable absorption if the Q4 revenues come in at the low-end of your implied guidance?

Yes, there's two factors, Jim. One of them is that, one of them is factory absorption. The other one 1 really is mixed, because and I'm keeping my fingers crossed here. We should see an uptick in printer sales. And that's good for the long-term, from a materials utilization standpoint. I'm a little concerned that customers will be managing inventory on materials and it's an unknown. So you could see a mixed effect and you certainly will still see a factory utilization effect. So I'd say there's two factors in that. And both of them lead to a little modesty on the gross margin for the quarter. Nicely, the insourcing work we've done, I think, will pay real dividends for us from a printer manufacturing standpoint as volumes rise again, hopefully in ‘25. But for right now, any uptick in printer sales in Q4 would be a drag on gross margins.

Got it. Thank you.

Thanks, Jim, and have a good Thanksgiving.

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

Good morning, Greg.

Yes, thanks. Hey, guys, this is Danny Eggerichs on for Greg today. Thanks for taking questions.

Hi, Danny. Sure.

I know you kind of said you're not going to touch on ‘25 yet, but just thinking about maybe profitability, I know in the release maybe some commentary was like trajectory towards profitability in quarters ahead? Are we thinking about it as something that can be a ‘25 event? Or is it just kind of too early to tell how should we be thinking about break-even [Multiple Speakers] into profitability?

Yes, Danny, it's the art of prediction. So I'm very encouraged by the number of new applications customers are talking about. If they put real capital behind that, we could see a nice lift in revenues in ‘25. It's a question of how quickly will they spend the money for it. Nicely, I have no doubt these applications are things they really want to put in their factories. That's a good thing. It's a timing issue. So we're hopeful revenues will be rising in ‘25, which will be helpful. Factory utilization is going to improve. The inventory reduction plan we have a great for cash, so those are all positive factors. And we have -- I’ll be candid with you we have you know real opportunities for cost management, which I think it will really help in ’25, so I can't give you a number, but I think you'll see significant movement in ’25. If those things come to pass, you'll see significant movement in ‘25 toward profitability and hopefully, at some point during the year, you'd see a swing to positive EBITDA and growth from there. So, it's just too early to tell and we won't put out guidance until we get to our fourth quarter results, but I'm encouraged by the trends and we'll see if they continue.

Yes, that makes total sense. Maybe if we can just touch on that AIG, the Application Innovation Group, sounds like was really strong in the quarter. Just maybe trying to size up that opportunity, maybe where contribution currently is? And when the cycle eventually turns, how should we be thinking about that opportunity moving forward?

And Danny, I would tell you that the revenue we generate from AIG. So these are obviously their applications customers are paying for us to develop with them. So there is a revenue stream there. The important thing about that is the trend of the revenue stream. So if it's growing, if not it may not be a material, we actually it may not be a material number on the overall P&L. But if it's growing, the customers are demanding more and more of our time to develop new applications. And we're picking and choosing those very carefully to make sure they're the highest volume, highest value components that we can help them develop for their factories. So I would tell you the magnitude of revenue is not really important. It's the direction that is headed in that 26%, I think we've quoted a 26% rise is fabulous. I mean our guys are swamped and we have 80-plus applications here is the biggest I believe it's the biggest in the industry is certainly I'm very proud of. I think they're the best in the industry. And these new applications are working on a tremendous. The amount of interest we have related to semiconductors broadly and data centers and things all driven by I believe this overall AI investment in the use of AI. That I think is going to be a nice way for us and for anybody in this industry that's positioned for primarily in the metal side of the business. I think the ability to print basically heat sinks, heat conduction capabilities very, very positive. So you could see some large applications flowing through in the future for those. And that goes all the way down to semiconductor equipment manufacturing. We can consolidate the number of parts in a machine. These are extremely expensive machines, as you might know. We can consolidate number of parts. We can make them higher-performing parts all by 3D printing them and we so we've got all of the major, the semiconductor equipment manufacturers working with us. We have people that are using GPUs and data centers working with us. In fact at Formnext, I wish I'd put this on a slide. You would have seen a copper heat sink that was incredibly interesting. It's out on the website I believe, but it was designed using AI quite frankly and it can conduct heat away 3x more efficiently than any other high purity copper heat sink in the world. And so we're tremendously excited about markets like that, because they're very valuable high payoff components, which will help the whole supply chain. So I quoted the AIG rise not, because it's material impact on the P&L, but because the trend is really positive in terms of customer interest in 3D printing. So can't really help you from a timing standpoint on revenue specifically, but the trend is very positive.

Okay. That's great. Appreciate the color.

Okay. Stay warm, Danny. Have a good Thanksgiving.

Thank you. Our next question is coming from Troy Jensen from Cantor Fitzgerald. Your line is now live.

Hey, gentlemen. Thanks for taking my questions here. I guess, Jeff, one thing I picked up in at Formnext that I thought was kind of new is a lot of positive talk about Oqton. You did mention it in your kind of pre remarks, but can you just kind of talk, give us an update on software in general on 3DXpert?

Yes, sure, Troy. And thanks for the call and thanks for the interest in Formnext too. Yes, you asked about two things there and I'd throw in a third. So our 3D Sprint software, which drives our polymer machines and 3DXpert on the metal side tremendously valuable tools for people that want to apply 3D printing. What we've done now with Oqton is basically integrate 3DXpert into the Oqton workflow and we've really targeted and focused Oqton on the high reliability markets like oil & gas we're doing with Baker Hughes and others. But the vast software platform Troy will allow us to monitor the entire workflow, not us, but customers that likes to the entire workflow from raw materials to finished part. And what we're seeing in the Baker Hughes production lines right now is a tremendous improvement in the productivity and quality of parts they can get out. The real time monitoring, the feedback control, the traceability required. So it impacts everything from setup time to the time a part is produced and it gives you full traceability of the part when it's finished. So you make your we're making 3D printing a true production process with this. Interesting feedback from Baker Hughes as also a customer of the software was this industry is now starting to really think about how to use 3D printing in production, whereas before it mainly went into laboratories for prototyping and even demo parts. Now it's being used on the factory floor. Those requirements are so different and so much more rigorous in terms of monitoring the job, monitoring the actual production of the parts. So I'm really pleased with Oqton’s progress. I think we'll demo it very nicely with Baker Hughes and then we're rolling it out broadly to other primarily industrial applications that have to make high reliability parts. So energy, aero, certainly the medical markets, anybody that has to make a high reliability part at high productivity.

Okay, how about two other questions here. Did you have a 10% customer in the quarter?

We do. Jeff, I have to, yes, I'm sure, I don't have the number in front of me, Troy, but it would be in our queue, I believe, Jeff, right? So it's in our queue. And certainly it would be related to dental, Troy, as it has been historically true. So that relationship remains very strong. The indirect printing of aligners is a great way to make them. And we continue to be a key supplier in that market. So yes, I mean, and I don't have a number, Troy, but it's in the queue and we can certainly get back to you.

Yes, I'm just glad to hear they're back. And then just last question, regenerative business, can you just talk about when you expect to hit the next milestones?

Yes, Troy, I think we'll see some additional milestones in ‘25. I wish we could talk more about it, both the precision and the speed at which we can print extremely fine structure now is amazing. And we have multiple paths to the design of those printers for production applications for organs and human body, specifically lungs. So I am really pleased with progress on the technology and the implementation of that for lung manufacturing. So you can expect, we'll be talking about milestones in 2025 that we're hitting and I continue to believe we're on track to be in a position to get to human demonstration on a reasonable timeline. United Therapeutics, our partner in this, will have to speak to that milestone. But in terms of the printing technology and things and the materials that go with it, extremely pleased with progress. And Troy, just one more advertisement for that. It's really cool applications that are going to bring a lot of benefit to humanity. It's also generating some great technology that we can transition into our industrial printers. For example, the PSLA with this high precision projection system over VAT, that's a direct outgrowth of our work on regenerative. So if you take a hardened projector that's used for industrial applications for workflow, it's a direct transfer and a drop-in. So you'll see some real technology synergy coming out of our work on regenerative into our industrial markets.

Awesome. All right, guys. Good luck going forward. Happy Thanksgiving.

Thanks, Troy. Happy Thanksgiving to you too, bud.

Thank you. Next question today is coming from Ananda Baruah from Loop Capital Markets. Your line is now live.

Good morning, Ananda.

Good morning. Good morning. Yes, thanks for taking the question. Happy Thanksgiving. Yes, appreciate you guys taking the question here. I guess a couple if I could, the first is on just sort of the core health care business and industrial solutions. Sort of taking it backwards, sort of the softer sell-out, notwithstanding, you guys do seem like the last three quarters, you kind of baselined, you know, at this high-50s, low-60s run rate? And in healthcare, you've picked up both, because of the dental business and then also here's kind of a question, is there anything in personalized health care as distinct from dental that we should be aware of? And so really with that as a backdrop and sort of the supplies business continuing to grow? What does the baseline business look like into ‘25? Understanding, Jeff, you're not given guidance yet. But if industrial solutions is baseline right now, and if you're seeing a pickup in healthcare, and if you're also seeing a pickup, ongoing growth in supplies, what does that say structurally about going into ‘25?

Yes, so on that, I'll start with the last point Ananda, yes all of that would lead you to say, look, ‘25 should be a better year. You know, as long as -- I think the whole world feels a bit snake bit as long as the geopolitical climate calms down and the economies continue moving in the direction they are. The unknown is that we have a change in administrations in not only in the U.S., but potentially other countries and these wars to the player periodically. So you know all of that said which are unknowns the trends are moving in the right direction in terms of both printer platform sales and consumable sales over the future. So hopefully we'll be sitting here when we announce Q4 results and we'll talk about a stronger ‘25. And also I think we've got some real cost opportunities, quite frankly. So we've been consistent in our investments in R&D. Those are paying dividends now and we've got some flexibility going into ‘25 to really manage our cost structure in a more optimum way. So I think there's some real opportunities within the four walls and then also in the external environment. In terms of healthcare, it's a great business. The orthopedic business, as I call it, the work we do for surgical planning on bone repair and surgeries is terrific. We continue to gain FDA approvals for other areas of the body. We're very strong in everything above the neck, fundamentally and on the spine. We're continuing to grow throughout the body elsewhere and it's a clear strategy. We're going to expand those applications below the neck just as quickly as we can develop them because all the same basic tools apply. So I expect to continue to see growth. There may be noise, quarter-to-quarter, but continue to see growth in that business. And it's a very good business, very hard for others to get into unless it takes time. So I think that's a great business. The dental business, we've got a good foundation with indirect aligners, and I think you'll see a lot of new products hit the market, and I mentioned dentures on the call, great business. I think 3D printing is a natural for those, and we have a great offering. So I'm excited about ‘25 for dentures, funny as that sounds, and then you've got other dental applications, night guards and others. So I love the healthcare business. It continues to be a core focus of the company. On the industrial side, these high reliability markets were swamped with interest on new applications from customers and I would hope ‘25 would see them start spending some real capital money in those directions, because the payoff is clear. So, and that gets back to the world economy and their factory utilization. So hopefully in all of that I answered your questions, if I can clarify anything, I'm happy to do it, Ananda.

No, that's really great. And just a quick follow-up on tariffs. Anything to be aware of in the tariffs that have been announced so far, or supposed to be announced?

Yes. You know, Ananda. Yes, it's very interesting, and this is all public. If you look at the tariffs that have been talked about, and particularly with respect to China, the Chinese metal printing companies have sprung up over the years and I think, you know, aimed toward Chinese markets and others, they're increasingly looking to export those products into the U.S. and you know, a lot of the U.S. applications are defense oriented. So I think both the tariff situation and the focus on defense will help us as a U.S. company. I think that's a great thing, because the influx of those printers, and I've shared this information, it's all publicly available, has been high. And I would hope as on-shoring and supply chain, shortening effects take hold, if we do see tariffs coming in, and certainly the growth in defense and aerospace, those are all positives for us as a U.S. company.

Super helpful. Thanks a lot. Have a great holiday, you guys.

Thanks, Ananda. You have a great Thanksgiving as well.

Thank you. [Operator Instructions] Our next question is coming from Brian Drab from William Blair. Your line is now live.

Good morning, Tyler here filling in for Brian. It was great color in the data center equipment. Sounds like additive would be great for the cold plates that go on GPUs and the other data center infrastructure? But I only have two questions today. First, what are your plans for convertible debt coming due in 2026? And then second, you mentioned a target of mid-40s gross margin? What revenue rate would need to be to support those levels? Assuming that on historically similar revenue levels going forward, you'd probably do higher margin just driven by the insourcing efforts. If you could just elaborate on that situation, appreciate the time and Happy Thanksgiving.

Thanks so much for the question and a happy Thanksgiving to you as well. So you touched on the key points. It's the factory, basically our gross margins, if you look at COGS, that's going to be a direct outgrowth of factory volumes and the increased benefit from insourcing. So, you know, it clearly, as volumes rise, it's a good thing for factory utilization rates. And the other benefit that brings us is a lower propensity to write down inventory. We absorbed, the reality is, we absorbed a lot of inventory when we insourced manufacturing aggressively over the last two years. And I would tell you for everybody listening to this call, I think it's a tremendous move for a low volume, high mix company like ours in this industry. Taking full control over your product from the start of design to the time you ship and install to a customer is critically important in controlling the pace of new product introduction and the quality of the product you ship. I firmly believe that. So we spent great effort in sourcing and unfortunately with that we had to absorb a lot of inventory from our contract manufacturing partners that they had purchased. [Technical Difficulty] due to just aging of the parks. They don't go bad, but they age out according to your policy. So we had some headwinds on the last two quarters from that. Hopefully as volumes pick up, that effect, that kind of over the top effect will go away. And you'll see improvements in factory utilization. So both those will really help gross margin significantly. And then on top of that, we're rolling out new materials all the time. So new consumables, we're also really driving services because the customers that have factories want great service. So…

Thank you, Jeff. That's a great color. I just wanted to follow-up on the plans for the convertible debt coming due in 2026? Just any color you can write there? Thank you.

Yes, it's certainly a work in progress, I would tell you right now. I mean, that's been a lovely debt instrument for us. We obviously went to market at a great time, and it's a zero coupon piece of paper. It's been terrific for us. It will come due at some point. We've got to deal with that. And so we're looking at how do we do that with the most traditional methods we can. Okay, so we're looking at how we can really reduce that debt. I'm not in a position to talk about it today, but clearly we want to deal with it as early as possible and not get toward maturity dates. So you'll hear a lot more about that in ‘25, okay?

All right, sounds good. Looking forward to 2025 for you guys and have a Happy Thanksgiving again.

Thank you and Happy Thanksgiving to you and Brian as well, okay?

Thank you. Next question is coming from Jacob Stephan from Lake Street Capital Markets. Your line is now live.

Hey, good morning, guys. Thanks for taking my questions. I'm just curious on the healthcare business. Obviously, nice to see that return to growth this quarter. But, you know, maybe just kind of give us a sense on the order patterns now that we're kind of two-thirds of the way through Q4? I mean, do you feel like, you know, kind of the revenue level where you guys were at in Q3 here is a good, I guess, a place to build off of, or do you expect the stability here?

Yes, so first, good morning, Jacob, and a Happy Thanksgiving to you coming up. Thanks for calling today. Yes, I think this is the foundation to build from. It's a, you know, healthcare is a, on the orthopedic side of our business, you know, the healthcare business, it's a good, steady business, you know, and the nice thing for us, we're doing two things to grow that business. Number one is developing more applications below the neck, for the skeleton below the neck, and it's really a great business. It continues to grow nicely, steadily over time. We worked closely with the FDA to get certifications on those. It's a great business. We are moving with our partners, our channel partners, into the trauma field in that, which I'm really excited about. Obviously, it's tragic when someone comes to an emergency physician with trauma into the skeleton, and our technology can apply there. It challenges us on speed, because those people need very fast treatment, but it's a lovely growth area for our business so I like that. And we've been stronger in the U.S. than Europe in that personalized health service. So Europe remains a strong focus as well, and in fact, some other parts of the world. But -- so I look at all those growth vectors. I like the foundation of the business today. It's a terrific business, strong brand, very happy. I see it growing from here. The dental business, obviously a little bit more volatile. We've been very primary in indirect printing of aligners and we're diversifying that portfolio now as we move into dentures and elsewhere. So a little bit more volatility as those markets rise and fall. But the diversification of the portfolio will really help in dental over time. And you'll see that over the next two years. So again, expect quarter-to-quarter noise like any business. But by and large, that health care business in total is going to continue to grow for us and we're thrilled with it. It's a terrific business to be in.

Got it. And then maybe just kind of on the I guess insourcing initiative you know requiring more inventory to be repurchased back from your contract manufacturers. I'm just curious you know I guess what percentage of that kind of inventory surplus was repurchased from the contract manufacturers and any…

Oh, gosh. Yes, Jacob. We had to buy, and I don't have a real number for you, but we had to buy, I think, Jeff, well over $100 million of inventory we had to bring back in house. I wasn't, I'll be frank with you, Jacob, I was not pleased, and I'm not blaming them, we were a small customer to these very large contract manufacturers. I was not pleased with their inventory management, their supply chain management, and the quality of the product they were shipping on our behalf, and the speed at which you could introduce a new product. So those four things drove us to insource, okay? And we're headquartered in South Carolina. It's a lovely place to build product. We've insourced 80%, 90% of our business now. Largely in South Carolina, we do some manufacturing in Europe as well. But as a part of that whole taking it back in, we needed to buy the good inventory that they had purchased on our behalf. So it created a small mountain, not Mount Everest, but a small mountain of inventory that we've been burning down. So we'll continue to work away at that. It's all good stuff, but the good parts, but we've just got to continue to work it down. And it's been difficult in a low sales environment. That's been challenging. So I'm proud of the 20% reduction we'll attain by the end of the year, but we've got more to go. And on the bright side, when you do it, it's a good source of cash. It frees up cash. But it has -- we've been able to make the investment, because we had a lot of cash on the balance sheet. So we did that at a time where we could afford it. And as we work it down, we'll realize the benefit from a cash and from a gross margin standpoint on COGS.

Hey got it very helpful. I appreciate all the color. Happy Thanksgiving and looking forward to ‘25 for you guys.

We are too. Thanks so much for calling in.

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.

Hey, Kevin, first of all, I want to wish you a very Happy Thanksgiving as well. You've been terrific at moderating our calls for many, many quarters now, so thank you for that. And for everybody else that's tuned in, I want to thank you all for joining our call today. For those of the U.S., I wish you all a happy and safe Thanksgiving holiday with your families. For those outside of the U.S., I wish you a very happy holiday season coming up. We'll look forward to talking to you again, at least in the new year.

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.