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Prodways to Discontinue Solidscape Wax 3D Printers for Jewelry

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French 3D printer manufacturer Prodways Group (PWG.PA) has announced that it will discontinue its small printers business for the jewelry market, a move aimed at refocusing its efforts on the industrial segment. This decision follows a period of disappointing performance in 2023, primarily attributed to weak machinery sales in the jewelry sector.

The cessation of the small printers business, marketed under the Solidscape brand, is a part of Prodways Group’s broader “growth and profitability” strategy. The company’s objective is to improve its results quickly and structurally by allocating resources to more profitable segments. Despite generating a turnover of around €5 million in 2023, the small printer business for jewelry also resulted in a significant operating loss, prompting this strategic redirection.

All the Small Things

Prodways acquired Solidscape from industry stalwart Stratasys (Nasdaq: SSYS) in 2018, with the goal of expanding its market share in the dental and jewelry sectors, as well as furthering its reach in North America, where the subsidiary is based. With its easy-to-use systems for 3D printing wax material, Solidscape’s extremely high resolution has proven effective for the lost wax casting of jewelry and dental restoration pieces. Under Prodways ownership, the most recent development from the wax printing group was the release of the sub-$15,000 Muse wax printer.

The Muse wax 3D printer. Image courtesy of Solidscape.

The decision to get out of making small 3D printers for jewelry suggests a sale of Solidscape, but could simply mean focusing on the dental sector. Perhaps a company with sufficient cash reserves and existing jewelry and dental businesses will give the business a new home. Prodways Group will now concentrate on the large industrial printers segment, particularly the high value-added MovingLight range. According to the firm, this division offers greater potential for activating growth levers and promises higher profitability profiles in Prodways’ more established markets, like the medical sector, and could open up new opportunities in industries like aeronautics.

The process of discontinuing the jewelry printer business is underway and expected to be completed by the end of summer 2024. The financial impact of this decision on the 2023 statements is estimated at around €15 million in depreciation, with additional costs of over €1 million anticipated in 2024, mainly in the first half of the year.

Furthermore, Prodways Group is undergoing significant changes in its Software business. A notable shift is the transition from traditional “on-premises” sales to the SaaS (Software as a Service) model, which began gaining traction in the second half of 2023. This change, supported by Dassault Systèmes, is expected to generate a smoother, more recurrent revenue stream despite an initial drop in revenues during the transition period. Additionally, a change in revenue recognition under the IFRS 15 standard has reclassified Prodways Group as an “agent” since July 2023, altering the way revenues are reported.

Prodways’ Financials

The company is scheduled to publish its full-year 2023 revenues on 14 February, where it will provide further details on the performance of its various business segments and its outlook for 2024. As of now, the company has typically demonstrated a consistent upward trend in terms of revenue, though the trailing twelve-month (TTM) period shows only about €2 million in growth from the previous year.

These strategic changes, including the refocusing on the industrial printer segment and the shift in the software business model, are expected to enhance Prodways Group’s prospects for recurring revenue generation and growth opportunities, positively impacting its profitability and cash generation from the second half of 2024 onwards. Gross profit has also steadily increased, while the company has nearly become profitable and recovered from the COVID-19 downturn. It has also improved its Earnings Per Share from a negative €0.27 in 2020 to a positive €0.03 in TTM and its Earnings Before Interest, Taxes, Depreciation, and Amortization from a negative €8.9 million in 2020 to €9.1 million in TTM.

Prodways’ balance sheet and cash flow similarly demonstrate the company’s overall recovery, with increased assets alongside more slowly growing liabilities. Because the firm has lost some working capital between 2020 and 2022 and has had an end cash position drop during that time, the sale of its Solidscape business could aid in offsetting this. Meanwhile, its operating and free cashflow has been generally positive, aside from 2020.

This means that, despite the fact that Prodways’ stock price is nearly as low as other pure-play additive manufacturing companies in the industry, it seems to be relatively healthy from a financial perspective. While the acquisition of Solidscape may not have paid off how Prodways had hoped, the French firm’s overall financial strategy may be a solid one.

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