On January 7, 2021, 3D Systems (NYSE:DDD) announced the sale of its “non-core software businesses,” sending the stock soaring to over twice its previous value. The company sold its Cimatron and GibbsCAM software businesses to a subsidiary of ST Acquisition Co. for cash proceeds of about $64 million.
Why did the stock jump from just $11.24 on Wednesday to nearly $30 per share on Friday (and climbing)? The company was able to use a portion of the proceeds from the sale to pay off $21 million in debt, making 3D Systems debt free. It also ended its at-the-market (ATM) equity program, which means that it does not need to sell stock and dilute existing shareholders. Along with reporting of better than anticipated financial results accounted for the stock price more than doubling.
In a preview of Q4 2020 financial results, the company anticipates revenue will outperform analyst predictions and raise between $170 million and $176 million for the company in that quarter. Fourth quarter non-GAAP operating income is expected to range from $11 million to $19 million, a large improvement over $5.6 million reported for Q4 2019 and $0.0 million for Q3 2020. Non-GAAP operating (loss) is anticipated to be between $(8.6) million to $0.5 million, which compares to Q4 2019 at $(4.7) million and Q3 2020 at $(67.6) million.
So far, the new president and CEO of 3D Systems, Jeffrey Graves, is delivery on his goal of getting the company out of debt and refocusing on core businesses, as he told us in our written interview and 3DPOD episode. This included the sale of its Australian facility, the largest digital manufacturing service bureau in the Asia-Pacific region, to GoProto in December. With the announcement of the new preliminary financials, Graves said:
“In the summer of 2020, we laid out a four-stage plan to deliver increased value to our customers and shareholders. This plan included: reorganization into two business units, Healthcare and Industrial Solutions; restructuring of our operations to gain efficiencies; divesting of non-core assets; and investing for accelerated, profitable organic growth. We are pleased to now see significant progress from these efforts, as reflected in accelerated top-line growth and rapidly strengthening operating margins. Our Team’s ability to deliver over 20% consecutive-quarter revenue growth in both business units, while executing large scale restructuring, was particularly gratifying to see. This was even more impressive when viewed with a backdrop of continuing headwinds from the COVID virus, which impacted our operations and those of our customers. Having surpassed our prior year, pre-COVID revenue performance in Q4, and with a continued strong focus on operational execution, we are excited about the trajectory we are on as we enter the new year.”
Graves told 3DPrint.com that part of his restructuring plan would involve the sale of non-core businesses, which include non-additive technologies. With the latest news, he reiterated this goal:
“The divestiture of Cimatron and GibbsCAM, which were businesses focused on subtractive technologies, was an important step in our plans to refocus our company on our core mission – ‘to be the leader in enabling additive manufacturing solutions for applications in growing markets that demand high reliability products.’ These divestitures strengthened our balance sheet, enabling us to both pay off our debt and terminate the ATM Program much earlier than originally planned.”
Now that the company is essentially debt-free, 3D Systems will be able to focus on its industrial and healthcare 3D printing businesses. This will surely make investors happy, as they regain confidence in a company that was previously burdened by an excess of acquisitions performed under its CEO, Avi Reichental, who stepped down in 2015. In our interview, Graves explained that Reichental’s replacement, Vyomesh Joshi, laid the foundation for a strong future for the company and that Graves is now building on that foundation.
For full transparency, I own a very small number of shares of 3D Systems stock.
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