3D Systems’ New CEO Vyomesh Joshi Shares Vision to Help the Struggling Company Find Success
Well, we’ve had just about a week to digest the 2016 first quarter numbers from within the 3D printing industry, and one of the more disappointing releases came from 3D Systems, which after a year of dealing with a stock value in free-fall, showed potential for a major turnaround at the end of 2015. But the Q1 that numbers portray wasn’t quite as promising for the company, showcasing decreases in revenue and seemingly unchangeable high operating costs. Although 3D Systems’ gross profit margin did slightly improve from last year (from 49.1% to 50.8%), there is a fair amount of evidence that something needs to be changed in order to cultivate more progress and profit within the company.
That change may have been initiated last month, when 3D Systems finally replaced former CEO Avi Reichental—who stepped down back in October—with Vyomesh Joshi, the former Hewlett Packard VP of Imaging and Printing. Joshi, who is also commonly known among his peers as VJ, certainly has his work set out for him, inheriting a company that took a brunt of the impact from the lackluster 18 months for a majority of the 3D printing market. Not long after the Q1 numbers came about, Joshi expressed his much-needed strategic vision for the company in 3D Systems’ first quarterly conference call, where he detailed his new direction to investors.
According to the stock market insight company Seeking Alpha, Joshi’s primary focus seems to be on switching from a technology-centered business model to a more customer-based one. Essentially, Joshi wants to zero in on the 3D Systems portfolio to see where they have the largest profit pools, and with that information, create sustainable comparative advantage for the company with their technology. A major goal for VJ will definitely be on driving down operational costs, which have remained a glaring issue within the 3D Systems business model for years now. In order to do this, Joshi will look to implement a more market-based strategy into their operations, focusing primarily on the sectors that have proven successful and sustainable for the company thus far.
“First and foremost, we will focus on improving quality, reliability and our supply chain to drive operational excellence. Second, we will define a market-based strategy to identify areas where our industry-leading technology can deliver a sustained advantage for our customers. We will organize the company and define our operating model around this strategy,” Joshi said during the Earnings Call for Q1 of 2016. “Finally, we will develop and strengthen our culture to unify the organization and provide leadership for 3D Systems to become a truly phenomenal company. Again, I’m excited and believe we have a tremendous opportunity ahead of us.”
Another point that Joshi made clear to the investors was that, despite the reoccurring losses and bad press surrounding their quarterly numbers, in reality 3D Systems isn’t very far from being in decent financial shape. Their gross margin from last year was 43.8%, which really isn’t all that shabby, but certainly still leaves room for improvement. As for making a profit, Joshi’s felt that if the right measures are taken to control 3D Systems’ Selling, General, and Administrative (SG&A) expenses, they could realistically reach profit margins above 10%.
Unfortunately for 3D Systems, and perhaps this is the most troublesome bit of all their financial troubles, is the vast amount of cash reserves they needed to spend on previous acquisitions, new property, and equipment in 2015. It’s very likely that the money will be tight for years to come, but the positive news is that 3D Systems has proven to turn a profit from operational activities, which they did back in both 2013 and 2014 before seeing negative cash flow in 2015.
It seems that Joshi has the vision needed to get 3D Systems back on the track of sustainability and profit, and his focus on business rather than technology likely rang positive with concerned investors. In fact, when you compare VJ’s strategy with the one presented in 3D Systems’ 2015 10-K, it becomes evident that the board of 3D Systems had this vision before bringing Joshi onboard, it seems he was chosen for the CEO role because the company believed he was best fit to implement this redirected growth strategy. Discuss the future of 3DS in the Joshi’s Plan for 3D System’s Future forum thread over at 3DPB.com.[Source: Seeking Alpha]
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