AMS Spring 2023

3D Printing Financials: Shapeways Posts 10% Revenue Growth in Q3, Bottom Line Falls Short

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3D printing companies are still under a lot of pressure. For 3D printing and production service provider Shapeways (NYSE: SHPW), its third-quarter earnings report was a mix of growing revenues and net losses. Management also addressed a non-compliance notice that the company received from the New York Stock Exchange last August because it failed to maintain its share at the $1 minimum, a rule that allows companies to remain listed on the exchange.

According to Shapeways’s third-quarter earnings report on November 14, 2022, revenue grew 9.5 percent to $8.4 million compared to $7.7 million in the prior year, in line with management expectations. The increase in revenue was primarily attributable to positive contributions from Shapeways’ software offering, scaling over additive manufacturing capabilities and traditional manufacturing services.

Shapeways 3D printed parts. Shapeways surpasses the 20 million part count. Image courtesy of Shapeways.

Gross margins for the company were 44% compared to 47% in the third quarter of 2021. While these were described as “top tier gross margins,” Shapeways didn’t post any profit for the period. As a result, its net loss was $4.6 million, or 9 cents per share, compared to a $2.6 million profit, or 7 cents per share, in the third quarter of last year.

During the period, the company registered an increase in selling, general and administrative expenses of $7.6 million, almost double the expenses of the same period in the previous year. This increase primarily resulted from increases in personal cost and amortization expenses related to the intangibles acquired as part of the acquisitions of Linear AMS, MFG, and MakerOS. As well as spending associated with being a public company and one-time restructuring costs from the move into the Island City facility.

Lagging shares

Since July 15, 2022, when Shapeways stock hit the $1 mark, shares have continued dropping, and the stock has not surpassed 70 cents per share in the last month. This is in line with the general company stock tendency, which has decreased over the last twelve months. On Tuesday, after earnings were released at the market close the previous day, the share price gained 10 percent in the first hour of trading hour. By Thursday, shares started retreating, and before the week ended, the stock was trading at 59 cents per share.

As for the notice of non-compliance with NYSE continued listing standards, which requires common stock to maintain a minimum average closing price of $1 per share over a consecutive 30-day trading period, CFO Alberto Recchi said the company is calling a special stockholder meeting in the first quarter of 2023 to approve a reverse stock split. Although this could be taken as a sign of trouble, the move is simply a change in the stock structure of the business to reduce the number of outstanding shares in the market.

Following the notice, the company has six months to regain compliance with the minimum share price requirement. However, if Shapeways cannot keep its stock at the $1 share price rule within this period, the NYSE may initiate procedures to suspend and delist its common stock.

Although the company stated that this notice has no immediate impact on the listing of Shapeways’ common stock on the NYSE, the low share prices combined with a net loss is not the best scenario for a company that went public less than two years ago.

Expansion trend

Looking ahead to the fourth quarter of 2022, management anticipates revenue to be in the range of $8.7 million to $9.1 million, banking on investments in both new hardware and go-to-market initiatives.

“We are highly focused on achieving profitability and managing cash burn,” described CEO Greg Kress. “Leveraging our investments in prior quarters, and supported by a solid balance sheet, we believe we are well-positioned to continue to execute on our strategic plan without the need to raise additional capital. Our digital manufacturing platform and software address an important and growing need to add flexibility and agility to supply chains. We have a significant market opportunity within the multi-trillion dollar global manufacturing industry, and with our enhanced capabilities, we believe our addressable market continues to expand.”

Shapeways CEO Greg Kress during the company’s public listing on the NYSE. Image courtesy of Shapeways.

On a conference call with analysts last week, Recchi anticipated some continued “near-term pressure on gross margins” and a ramp in sales in the future from Shapeways investment in new technologies and materials as it continues to expand its digital manufacturing platform and increases its business development activities throughout the remainder of the year.

For CEO Kress, the company has a strong cash balance, which supports normalized cash burn, positioning Shapeways on a path toward profitability. Commenting on the company’s position with investors, Kress concluded that Shapeways is looking at a “massive opportunity within the $1 trillion global manufacturing industry and that enhanced capabilities from recent investments will help its addressable market expand. As the company evolves and tries to maintain focus on core initiatives like commercializing its software, management is hopeful that Shapeways will continue optimizing and expanding its foothold over time.

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