3D Printing Financials: Prodways Faces Headwinds, Cuts Jewelry Printers and Cristal Dental Lab for Turnaround

Prodways (EPA: PWG), a European leader in industrial 3D printing, encountered financial challenges in 2023, as revealed in its earnings report. The company saw a decline in revenue and profitability due to changes in its software revenue recording and a downturn in printer sales. Despite these hurdles, the company managed to maintain a stable EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin, adjusted its business model, and focused on profitable sectors. The year marked a period of transition for Prodways as it adapted to market fluctuations and internal restructuring to set the stage for future growth.

For 2023, Prodways reported a revenue of €75 million, a decrease from the previous year’s €81 million. The drop in revenue was influenced by a €6.5 million reduction due to new accounting practices for software activities starting in July 2023. Additionally, its Systems division, responsible for 3D printer and materials sales, faced weaker sales, especially in the fourth quarter of the year, weighing down on the financial outcomes. However, its Products division, which is involved in manufacturing and selling 3D printed parts and prototypes, saw a promising 11% growth, indicating that not all business areas were negatively affected. After considering financial expenses and tax charges, the net result is a loss of €14 million, highlighting the financial challenges Prodways faced in 2023.

Prodways’ financial performance in 2023 showed a decline in profitability, with EBITDA falling to €6 million, representing an 8% margin. This was in line with the group’s forecasts but down from the previous year by €5 million. This decrease was attributed to several factors, including one-time debt forgiveness in 2022, increased spending on sales teams, losses in the small printer sector for jewelry, and reduced sales of industrial printers.

To address these challenges and aim for a double-digit EBITDA margin, Prodways discontinued its less profitable small 3D printers for the jewelry market, which saw a decrease in sales by nearly 20%. It is now revamping its sales strategy, focusing on profitable high-volume industrial printers, such as its MovingLight Digital Light Processing (DLP) technology for professionals in the dental sector. The company has already anticipated that this action plan will notably weigh on the profitability of the first half of 2024 (a little over €1 million in exceptional costs) but will have a positive impact on EBITDA in the second semester. Other significant financial activities included the sale of the Smilers stake—which was acquired in 2014 for €1.1 million amid the emergence of orthodontic alignment tray 3D printing—which contributed positively to the cash flow.

Despite the transition year and falling printer sales, Prodways generated a positive cash flow of €2.1 million in 2023, with available cash reaching €16 million and a decrease in net debt, which remains at a low level of negative €2.9 million.

Meanwhile, the company’s stock performance suffered a marked decline over the past five years, adding to long-standing investor concerns and the ongoing challenge to strengthen its market position and finances. Prodways went public in May 2017, when it was listed on the Euronext Paris stock exchange. At that time, the stock price reached its all-time high of almost €7 but has since declined to 76 Euro cents per share.

The full range of Prodways technologies. Image courtesy of Prodways.

After a challenging 2023, the company says it plans to refocus its efforts to improve its financial and operational outlook. Aside from shutting down its less profitable jewelry printer line, Prodways is also selling its Cristal laboratory subsidiary. This subsidiary offered additive manufacturing for dental prostheses but ultimately became a competitor to some of Prodways’ own customers in the dental sector. This sale is expected to allow Prodways to form a partnership with one of the largest dental prosthesis laboratories in France around 3D printers and materials.

Furthermore, Prodways is planning to reduce its workforce. While difficult, the business considers this move as necessary to align its resources with its more profitable activities. Despite the reduction, the goal is to maintain a strong team that can generate higher revenue, similar to what was achieved in 2021. These actions are all part of Prodways’ strategy to lower its fixed costs, which should, in turn, improve its earnings and cash generation in 2024

Looking ahead to the rest of the year, Prodways is optimistic. The company anticipates revenue growth and improved EBITDA margins, driven by strategic changes, focusing on more profitable product lines and shifting to software-as-a-service (SaaS) models. These initiatives are expected to improve financial performance and customer demand. Prodways says it plans to finalize its exit from the jewelry printer market by the end of the summer. With these strategies, Prodways seeks to increase its revenue from the €59 million reported in 2023.