3D Printing Financials: 3D Systems Restructuring to Save ~$50M by Q4 2024

In a year defined by wrestling for acquisition supremacy in the 3D printing universe, 3D Systems (NYSE: DDD) has just unveiled its next move: a restructuring initiative to streamline operations and a preliminary look at its third-quarter financial results. This announcement reflects not only the company’s current standing but also speaks to broader trends and maneuvers that have defined the 3D printing industry throughout the year.

According to the company, its strategic restructuring aims to improve efficiency and provide annualized savings of between $45 million and $55 million by the end of 2024. Central to this restructuring is the intent to “rationalize headcount.” This could mean reducing, reallocating, or potentially increasing employees in some areas. Additionally, by aiming to rationalize “geographic locations in all functions across the company,” the firm could indicate plans to evaluate and merge its various physical locations, ensuring more streamlined operations across all departments.

Industry dynamics

This isn’t the first time we’ve heard about a restructuring initiative from 3D Systems. When Jeffrey Graves became CEO in May 2020, he rolled out a four-phase plan to reshape the company. By August 2020, amidst the pandemic, he shifted the company’s focus onto two key areas, healthcare and industrial, letting go of parts of the business that didn’t fit this vision. He also made the tough call to reduce the workforce by 20% and set a goal to save $100 million in costs. Fast forward to 2023, and 3D Systems announced another step in this ongoing restructuring, with Graves highlighting further plans for efficiency and growth.

3D Systems President and CEO Dr. Jeffrey Graves. Image courtesy of 3D Systems.

While seeking to cut costs, the company stresses that it won’t compromise on customer service or delivery reliability. Keeping its eyes on the future, it says there are plans to roll out printers and new materials by 2024. These actions aim not only at immediate profitability but also at positioning the company for long-term growth in a rapidly expanding global 3D printing market.

This move is perhaps a response to the dynamic changes in 2023. 3D printing frontrunner Stratasys (Nasdaq: SSYS) has been the center of numerous acquisition attempts, including one by 3D Systems itself. Though Stratasys rejected 3D Systems’ offer, the move highlighted the aggressive strategy 3D Systems was eager to adopt.

Stratasys’ 2023 saga offers crucial context. The year began with Nano Dimension‘s (Nasdaq: NNDM) acquisition bid. Despite Stratasys’ rejections, Nano Dimension persisted, even raising their final offer. The back-and-forth culminated with Stratasys announcing a merger agreement with Desktop Metal (NYSE: DM), only to terminate it due to shareholder disagreement. Then came 3D Systems with its unsolicited bid, which was also declined. Given the chaotic sequence of events, Stratasys eventually saw its shares drop. With Stratasys’ strategic alternatives announcement still pending and their third-quarter earnings release on the horizon, the sector remains tense.

Earnings preview

Further shedding light on its financial health, 3D Systems anticipates a revenue bracket between $123 and $124 million for the third quarter of 2023. When compared against 2022 values, this seems to suggest a decline, driven primarily by continued softness in printer demand. While the company expects fourth-quarter revenues to strengthen on a consecutive basis, consistent with historical seasonality trends, full-year 2023 revenues will be softer than expected. This, combined with continued uncertainty in the macroeconomic and geopolitical environment, is leading the company to withdraw its full-year 2023 financial guidance, which offered a full-year 2023 revenue projection between $525 million and $545 million.

Shedding light on the statement, Troy Jensen, Managing Director Senior Research Analyst at Cantor Fitzgerald, says 3D Systems negatively preannounced Q3 results and is no longer endorsing their prior 2023 guidance because “the market remains soft.”

“We believe the high-interest rate environment and softening economy have continued to extend sales cycles and given customers a reason to defer purchase decisions. Our survey work was consistent with these results. The hardware (printer) market continues to be the most challenging, but materials and service bureau demand appears to be more in line with channel expectations,” states Jensen.

3D Systems Headquarters. Image courtesy of 3D Systems.

Trends

With the Stratasys failed acquisition backdrop, 3D Systems’ early results could be considered a strategic step to help manage market speculations. These numbers could help guide how investors feel and prevent sudden, big changes in stock prices. For 3D Systems, these are strategic moves in a rapidly evolving landscape. When viewed in light of 2023’s industry dynamics, its preliminary results and restructuring initiative show a company attempting to bolster its position amid the turbulence in the sector.

Notably, 3D Systems is still riding high on recent news: the company’s founder, Charles “Chuck” Hull, was recently honored with the prestigious National Medal of Technology and Innovation. Through his game-changing invention of stereolithography, Hull has paved the way for the birth of an entirely new industry. Often hailed as the “Father of 3D Printing,” Hull’s visionary contribution not only streamlined production processes but also democratized design and manufacturing, enabling big and small innovators to bring their visions to life like never before.

Investors and industry observers should mark their calendars for November 8, 2023, when 3D Systems will share its full financial results for the quarter and restructuring plans. Given the roller-coaster that 2023 has been for the 3D printing world, this promises to be another significant moment.

3D Systems CEO Jeff Graves will be participating in 3DPrint.com’s AM Investment Strategies, a free, online roundtable presented by Additive Manufacturing Research and Cantor Fitzgerald on November 2, 2023, just a week before the start of Formnext 2023. Also participating will be Yoav Zeif, CEO of Stratasys; Benny Buller, CEO of Velo3D; Arno Held, Managing Partner at AM Ventures; Scott Dunham, Executive Vice President of Research at AMR; Max Lobovsky, CEO of Formlabs. The discussion will be moderated by Troy Jensen, Managing Director at Cantor Fitzgerald.

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