3D Printing Financials: 3D Systems Misses Revenues by 9.32%, Targets 2027 for Clinical Human Lung Trials

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In the latest financial unveiling, 3D Systems (NYSE: DDD) shared its fiscal report for the last quarter of 2023 and the entire year, shedding light on its struggles and strategic moves in response to current economic headwinds. In its latest report, 3D Systems revealed a decline in revenue from the previous year, both quarterly and for the full year 2023. Despite efforts to improve operational efficiencies, 3D Systems also faced net losses and a negative adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), reflecting lower revenue and increased operating expenses, particularly in investments in regenerative medicine and consulting services. Nonetheless, management says they have taken steps to restructure and mitigate these financial pressures, aiming for a more stable and profitable future.

In the fourth quarter of 2023, revenue dropped to $114.8 million, a 13.5% decrease from the previous year, mainly due to lower sales in the dental orthodontics sector and a drop in printer sales, as customers delayed capital expenditure investments amidst economic uncertainties. This was $11.8 million, or 9.32%, less than the company’s estimates. Over the entire year, revenue fell by 9.3% to $488.1 million, pointing to a sustained downturn in demand. The company also faced net losses of $300.4 million, or $2.30 per share, for the quarter and $370.4 million for the year, mainly because of non-cash charges related to goodwill and other assets.

Despite these losses, there was a slight improvement in gross profit margins at 40.4% in the last quarter of the year, indicating some operational efficiencies. However, adjusted EBITDA, a key measure of profitability, saw a loss of $12.26 million for the quarter and $24.52 million for the year. Amidst these financial pressures, 3D Systems hopes restructuring and efficiency measures will help steer back toward profitability and a positive cash flow in 2024. Unfortunately, the measures not only include a reduction in external spending and significant site consolidations but also headcount reductions.

3D Systems at Formnext. Image courtesy of 3D Systems via LinkedIn.

In a strategic move to bolster its financial position, the company repurchased $135 million of its Convertible Senior Notes at a significant discount, reducing its outstanding debt by nearly 30%. With over $331 million in cash and equivalents, 3D Systems is positioned to support its restructuring and efficiency initiatives and continued investment in growth areas.

As 3D Systems navigates current challenges, it’s also pioneering regenerative medicine, planning to start human trials for a human lung by 2027. If successful, this initiative could transform healthcare and the company’s future. 3D Systems aims at three key areas: creating human organs, tissues that aren’t organs, and helping with drug development. To streamline its business even further, it brought on Harriss Currie, who has over 30 years of experience. He will support the company’s journey towards creating organs like the lungs, showing how far 3D printing technology can go in healthcare.

From left to right: 3D Systems President Jeffrey Graves, Systemic Bio CEO Taci Pereira, and 3D Systems EVP of Healthcare Solutions, Menno Ellis, along with the Systemic Bio team at the ribbon cutting of their new headquarters. Image courtesy of 3D Systems.

3D Systems President and CEO Jeffrey Graves remains cautiously optimistic, attributing the year’s performance to macroeconomic and geopolitical challenges. Despite the setbacks, the company does not view these as indicators of a permanent downturn in customer adoption or market share loss but rather as temporary market timing issues.

In an earnings call with investors, Graves explained, “Many new customers in the post-Covid period are evaluating additive manufacturing, embracing this technology. Despite recent macro factors slowing industry investment, we anticipate compounded annual growth of over 20%, leading to an $80 billion market opportunity in five to seven years. Economic conditions and new market entrants have temporarily impacted spending and created industry fragmentation. However, 3D Systems, with our scale, robust R&D, and global infrastructure, is well-positioned to capitalize on this growth. Our focus on driving efficiencies, sustaining R&D, and leveraging our strong balance sheet equips us to navigate economic volatility and seize the substantial market opportunity ahead.”

Graves also pointed out why investors might not yet see the expected growth in 3D Systems’ numbers. He says current economic challenges have reduced customer spending but expects this to improve as the economy improves. Also, new companies, especially from China, have entered the market, making it more competitive and scattered. Despite these issues, he still considers 3D Systems to be one of the biggest players in the field, with almost $500 million in revenue in 2023 and a growing profit margin, even in tough times. With over 600 printers across various continents, Graves considers 3D Systems to prove its global reach and effectiveness and reassure investors of the company’s ability to manage costs and keep investing in growth.

The goal for 2024 is to continue restructuring to cut costs, improve margins, and ensure a path toward sustained profitability and positive cash flow. The company also plans to balance short-term financial health with R&D investments to seize growth opportunities as economic conditions improve. For 2024, 3D Systems has set its revenue guidance between $475 million and $505 million, aiming for a gross profit margin of between 42% to 44% and an adjusted EBITDA that breaks even or better.

Affected by economic pressures that led to a downturn in sales, the past year was tough for 3D Systems, particularly in the dental orthodontics sector. Do the company’s strategic adjustments, focusing on cost reduction and efficiency improvements, signal a response to these challenges? Only time will tell, but with a solid cash position and a plan for restructuring and growth, 3D Systems is looking to navigate the uncertain economic landscape, aiming for profitability.

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