3D Printing Financials: 3D Systems Stock Soars Following Earnings Report

3D Systems (NYSE: DDD) shares rose as much as 41.9% on August 10, 2021, after the 3D printing company posted better-than-expected second-quarter revenues and earnings at market closing the day before. The leading 3D printer manufacturer reported revenues reflecting double-digit growth on a consecutive-quarter and year-over-year basis and adjusted earnings of 12 cents per share, almost doubling a loss of 13 cents per share in the same period last year.

Driven by continued growth in healthcare and increased demand from its industrial customers, 3D Systems reported revenue of $162.6 million for the period ending June 2021, surpassing its 2019 and 2020 levels for the same period, that is, $158.6 million and $112.8 million, respectively. As the 3D printing industry is rebounding from the pandemic, we will probably continue highlighting companies posting revenues similar to those of 2019.

“We believe this performance is the result of our exclusive focus on additive manufacturing, bringing together our printers, materials, and software technologies to solve specific key customer applications that drive market adoption in both Healthcare and specific Industrial markets such as semiconductors, space systems, and advanced transportation systems,” noted 3D Systems President and CEO Jeffrey Graves.

Revenue from the healthcare segment more than doubled, from $49.1 million in the second quarter of last year to $82.8 in 2021, and increased 14.2% compared to the last quarter. This increase from last quarter included double-digit growth in medical applications and strong demand for dental materials. In addition, 3D Systems said that demand for personalized health services and advanced manufacturing of medical devices continued to be strong during the quarter, as evidenced by the 15.5% quarter-over-quarter growth in the medical applications segment alone, which does not include dental.

Alternatively, industrial sales increased 25.3%, from $63.6 million in Q2 2020 to $79.7 million in Q2 2021, and increased 49.6% when excluding businesses divested in 2020 and 2021. After seeing a return to growth in the first quarter of 2021, industrial sales continued to rebound into the second quarter, growing sequentially 8.3% compared to the first quarter of 2021, with solid demand for both products and materials. In addition, thanks to a renovated segment-oriented approach, Chief Financial Officer Jagtar Narula revealed to investors during an earnings call on August 11, 2021, that they sold a record three flagship Factory 500 metal machines in the second quarter, which went into the aerospace and transportation segments.

Following last year’s pandemic and long-standing financial crisis, 3D Systems described an “exceptional rebound” in revenue, profitability, and cash performance while reaping the benefits of its four-phase transformation plan, which included a reorganization into two business units – healthcare and industrial – and a divestiture of non-core assets.

In June 2021, the company announced an agreement to sell its on-demand parts business. Then, just after quarter-end, the company sold its medical simulation business, Simbionix, which did not align with the core focus on additive manufacturing. Following the close of the transactions, expected for the third quarter of 2021, the divestitures will drive a cash increase in the balance sheet, from $131.8 million at quarter-end to over $500 million with no debt. The funds will go towards future strategic investments that will support the core business.

Organic revenue, which excludes the impact of acquisitions and divestitures completed in 2020 and 2021, climbed 59.3% in Q2 2021 versus Q2 2020. Last year, the second quarter was heavily impacted by the Covid-19 pandemic, which according to Narula, “makes year-over-year comparisons less useful.” During the call with investors, Narula suggested that comparing revenues to the second quarter of 2019 is much more “informative.” Thereby, organic revenue this year was 11.4% higher compared to the same period in 2019. The successful quarter was driven by strong demand in new hardware purchases, and growing material sales as printer placements are resulting in strong recurring revenue streams.

Now that Graves executed the four-phase plan launched last summer, he has goals set to expand the healthcare business, which comprises over half of the company’s revenue, and on key technology partnerships, including its regenerative medicine business. In 2021, company founder Chuck Hull announced he would focus on groundbreaking biotechnology efforts as the new Chief Technology Officer for the regenerative medicine subsegment. Following up on this ambitious new plan, the company acquired Allevi in May 2021, a bioprinting business with presence in over 350 research labs around the world. The move will drive potential applications in the pharmaceutical market where printed customized 3D tissue samples can be used for advanced drug therapy development.

Currently, the company said it would focus on its  “invest” phase. Working towards that end, 3D Systems brought in former EOS Chief Technology Officer David Leigh and expanded its South Carolina and Colorado facilities to address the rising demand for new healthcare and industrial applications. Graves said he hopes to see this “momentum” continue, with a strong double-digit growth business in the long term. Healthcare is clearly growing faster than industrial, but the CEO expects industrial to grow as well.

“The last 12 months are now behind us, and I truly believe the next 12 months can be the best this company has seen in its history. Financially, we are arguably the strongest company in the space, which means we’re the best positioned to take advantage of the accelerating adoption of additive manufacturing. We’ll use our balance sheet to drive growth in our core business and a keen focus on driving recurring revenue streams,” concluded Graves.

3D Systems CEO Jeff Graves will be joining us at the upcoming SmarTech – Stifel AM Investment Strategies 2021 summit on September 9, 2021. The half-day online event focused on 3D printing market activity is free to attend. Register at the summit website here.