3D Printing Financials: 3D Systems Tops Earnings Estimates, Focuses on Future Investments for Growth
Led largely by a strong increase in its healthcare segment, 3D Systems (NYSE: DDD) reported better than expected earnings and sales for the quarter ending September 30, 2021. However, despite the solid earnings report on November 8, 2021, company stock dipped 14% the day after and continued slipping on the following days, showing investors appear to want more from the company.
As posted in its third-quarter financial results, overall revenue came in at $156.1 million, reflecting 14.6% growth compared to the same period last year, and increased 35.9% when excluding businesses divested in 2020 and 2021. In addition, the results reflect an increase of 28.3% in the healthcare segment to $76.4 million, against $59.5 million in 2020, driven by continuing strong demand for personalized health services and dental applications in both printers and materials. Actually, the last four quarters have seen the highest level ever of dental material sales compared to any prior four-quarter period.
There was also an ongoing strength in the industrial division, which saw revenue grow 4% to $79.7 million compared to $76.7 million during the same period last year. This segment is continuing its rebound, seeing strong performance in various sub-segments, most notably in jewelry, automotive and transportation, and general manufacturing.
More importantly, revenue adjusted for divestitures was 21.2% higher than pre-pandemic third-quarter results, reflecting a continued strong growth momentum of the business. In fact, according to 3D Systems Chief Financial Officer Jagtar Narula, since the third quarter of 2020 was the beginning of the economic reopening from the Covid-19-related shutdowns, it is valuable to compare current results with those in 2019, which was untainted by the pandemic. “We are comparing on an apples-to-apples basis,” he reflected.
“With continuing strong demand, our operational challenges have largely centered around global supply chain and logistics issues, which are unfortunately continuing to plague most companies around the world,” described 3D Systems CEO Jeffrey Graves during an earnings call with investors. “Our solid execution in the face of these challenges in the third quarter resulted in strong double-digit growth with revenues increasing by 15% before adjusting for divestitures.”
Turning to earnings, the increased revenue and sustained cost management drove strong profitability, as the Rock Hill, South Carolina-based company reported net income of $292.7 million, or $2.34 per share, in the third quarter of 2021 compared to a loss of $72.9 million, or 61 cents per share in the prior year. The year-over-year improvement was driven by gains on divested businesses as well as the goodwill impairment charge the company took in the third quarter of 2020.
Already on the last stage of a four-phase transformation journey, the company completed the last of its divestitures, repaid debt, and stockpiled over $500 million in cash on its balance sheet. During this final stage, 3D Systems is investing in significant opportunities set to drive high-margin recurring revenue, as evidenced by the acquisition of AI-driven software company Oqton.
One of the company’s key strategic advantages has been its involvement in the emerging bioprinting market. Since 2017, 3D Systems has focused resources in regenerative medicine and began a joint development program with biotech firm United Therapeutics Corporation to create a bioprinting technology that will make scaffolds for human lungs using a process called “Print to Perfusion.” Once developed, the technology can be applied to other major organs in the human body as well as a wide range of other human and laboratory applications.
Building upon this foundation, 3D Systems recently acquired Houston-based Volumetric Biotechnologies, a 3D bioprinting spin-off company founded by Rice University bioengineers Jordan Miller and Bagrat Grigoryan. The move provides unique biological talent to the organization, including a new Chief Scientist for Regenerative Medicine, Jordan Miller, who will allow the company to expand and accelerate its growth in human and laboratory applications for bioprinting.
“By acquiring Volumetric, we’re adding critical skill sets to our 3D Systems’ team, which we feel are a perfect complement to ours, bringing strong biological expertise and cellular engineering skills along with highly creative bioprinting systems to our development group,” explained Graves.
All the investments in software, product platforms, and regenerative medicine complement an existing business portfolio that generated $20.7 million in cash from operations during the third quarter to bolster a balance sheet that boasted $503 million of cash, ready to support additional growth. With this, the company says it’s ready to focus on driving the adoption of additive manufacturing, solving customers’ most complex application needs, and generating high-margin recurring revenue streams critical to sustaining value creation.
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