3D Printing Financials: Shapeways Faces Challenges Despite Revenue Uptick

Shapeways (BCBA: SHPW) faced a challenging year in 2023, with financial results showing a mix of growth and setbacks. While the company saw an increase in revenue and gross profit, it experienced a larger net loss than the previous year. The tough economic environment led Shapeways to reduce its workforce by 15% and implement cost-reduction measures, including cuts in new hires and non-critical spending. These steps show how the company explores strategic alternatives to maximize shareholder value. After a difficult earnings season that saw many firms in the 3D printing industry announcing adjustments, realignments, and cost restructuring initiatives, Shapeways adds to the list of public businesses facing similar challenges.

Revenue for the year was up slightly, reaching $34.5 million, compared to $33.2 million in 2022. The gross profit also saw a slight increase to $14.5 million. However, this growth was overshadowed by a decline in gross margin, which fell to 42% from 43%, and a significant rise in net losses, which doubled to $43.9 million from the previous year’s $20.2 million.

In the fourth quarter of 2023, Shapeways demonstrated some financial stability, with revenues rising to $9.5 million from $8.7 million year over year. The gross profit for this quarter increased by 23% year-over-year to $4.4 million, and the gross margin expanded to 46%. This improvement was attributed to a “higher contribution” from software and enterprise sales, particularly in the automotive sector, where Shapeways has improved its production capabilities.

Despite these gains, Shapeways says it faced “elongated sales cycles and the difficulty in rapidly scaling its operations.” In response, the company implemented significant cost-cutting measures, notably layoffs in the fourth quarter of 2023. These layoffs, part of a broader strategy initiated in the third quarter to cut operating expenses, led to a 15% reduction in Shapeways’ global workforce. Additionally, the company scaled back on new hiring and cut non-critical capital and discretionary spending. These actions aligned Shapeways’ cost structure more closely with the prevailing market conditions and macroeconomic uncertainties.

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

“Throughout 2023, we focused on executing our key strategic objectives of expanding our enterprise and software businesses,” said Greg Kress, Shapeways’ CEO. “We remain dedicated to meeting evolving customer needs and the ongoing shift towards digital manufacturing solutions. Even as we are seeing these improvements and remain encouraged about our opportunity over time, the current environment remains challenging, sales cycles are elongated, and our business has not scaled as quickly as anticipated.”

Shapeways continues to focus on growing its enterprise manufacturing, particularly in the automotive industry. The company claims it is securing multi-year contracts and increasing sales with its top customers. It is also expanding into the global CNC market. It has launched new software tools to upgrade customer accessibility and manufacturing capabilities and address the sector’s supply chain challenges. This expansion includes the launch of Shapeways’ new computer numerical control (CNC) Instant Quote feature, an online quoting portal that offers access to CNC customers but also upgrades Shapeways’ suite of enterprise manufacturing solutions, allowing it to become a go-to company for both additive and traditional manufacturing processes.

Meanwhile, Shapeways is navigating through tough macroeconomic conditions, similar to other firms in the 3D printing arena. The company has been actively working with advisors to explore various strategic options to enhance shareholder value. These options include potentially selling a significant part of its assets, merging, or engaging in other business combinations. During preliminary talks and market evaluations, the company says that potential buyers have shown interest in acquiring specific parts of Shapeways. Particularly its manufacturing or software divisions, but not both simultaneously. Shapeways continues to “assess these strategic alternatives” and “engage in discussions with possible acquirers,” although no definitive sale agreement has yet been reached for either business segment.

In August 2023, Shapeways moved its stock listing from the New York Stock Exchange (NYSE) to the Nasdaq, retaining the ticker symbol “SHPW.” This change happened after the company conducted a 1-for-8 reverse stock split to boost its share price above $1, aiming to prevent delisting from the NYSE, a risk first identified in August 2022. Despite these steps, Shapeways’ stock price has since declined from $4.5 to below $2.

Looking ahead, Shapeways expects revenues between $8.3 million and $8.6 million for the first quarter of 2024. The company’s future depends on its ability to adapt to the shifting market demands, optimize its cost structure, and successfully navigate its strategic options to enhance shareholder value. This earnings report revealed a difficult 2023 financial performance for Shapeways and a company at a critical juncture, facing increased losses despite revenue growth and strategic expansion efforts. The company’s decision to reduce its workforce and explore strategic alternatives shows the harsh realities of the current economic environment and the need to adapt strategies in the 3D printing landscape.