3D Printing Financials: Prodways’ Q1 2024 Revenue Drop and Accounting Overhaul

Prodways (EPA: PWG) has released its earnings report for the first quarter of 2024, announcing modest revenue. This result is lower than last year’s, reflecting the company’s ongoing adjustments to its operations and strategy, including adopting new accounting standards and reshaping its business focus. Prodways has shifted its focus from smaller, less profitable printers, specifically discontinuing small printer activities, to concentrating on larger industrial 3D printers and expanding its software business. These strategic shifts are still in the early stages and might not yet have fully offset the decline in revenue from discontinued products.

Looking back, last year’s earnings report for 2023 highlighted significant changes, including discontinuing less profitable sectors such as small 3D printers for the jewelry market and the sale of the Cristal dental lab. These decisions sought to tap into more profitable markets and were expected to improve the company’s overall finances in the long term.

This year, Prodways has seen significant accounting changes with the adoption of the IFRS (International Financial Reporting Standards) 15 standard, which affects how revenue is recognized. This new standard has led to adjustments in reporting revenue from customer contracts, impacting both the timing and the amount of revenue reported in the first quarter. These changes are part of efforts to align financial reporting with international accounting rules, which affect how revenue from contracts with customers is reported and ensure more transparency and consistency in the company’s finances.

Prodways Q1 2024 earnings according to new IFRS accounting adjustments. Image courtesy of Prodways.

Reflecting these accounting standards, Prodways’ published IFRS revenue for the first quarter of 2024 was €16 million ($17 million). This represents a decrease of 26% from the previous year’s IFRS-reported figure of €21.6 million ($23 million). Its Systems division, which specializes in industrial-scale 3D printing solutions, posted revenues of €7.6 million ($8.1 million) for the quarter, down 36% from €11.9 million ($12.7 million) in the same period last year. This decrease is largely due to the company’s shift from smaller, less profitable printers to focusing on the industrial segment.

According to the company, this new focus is, however, showing some signs of success, including selling two new industrial MovingLight Digital Light Processing (DLP) printers—one for a global orthodontics company and another for a dental prosthetics lab. These sales indicate that despite the initial dip in Q1 revenue, the shift could help rebuild commercial momentum.

Prodways enthusiastically remarks in its earnings report that “While this sales level remains insufficient, the pipeline of serious commercial opportunities is filling up.”

Despite the initial challenges posed by adopting IFRS 15, which has impacted how revenue is recognized and reported, Prodways said the software side of the Systems division has shown robust growth. This increase is largely due to a new sales structure and the transition to a SaaS (Software as a Service) business model, which appears to be gaining new contracts.

On the other hand, the Products division, which includes the company’s Digital Manufacturing activities, reported revenues of €8.4 million ($9 million). This sector experienced a rocky start in January but saw a notable recovery in March, with an 11% increase in revenue and a steady rise in order intake. Despite this positive trend, the audiology segment suffered a decline, with revenues falling by a few hundred thousand euros due to reduced production of hearing protection devices in the last month. This was partly due to changes in the commercial and technical operations and the scheduling of field impression-taking tours. This new organization should yield significant results as early as the second quarter of 2024, anticipates Prodways.

Prodways’ stock has shown volatility over the past three months, hitting its all-time low of €0.71 ($0.76) on April 19, just one day after its first-quarter earnings for 2024 were released. Notably, the stock has remained below the €2 ($2.13) mark since August 2023, with a declining trend observed.

As Prodways moves forward, the company manages the repercussions of these significant changes. The company explained that although the first quarter of the year “remains disrupted” by these changes, they align with the original expectations. Although no guidance has been reported during this period, Prodways says it “continues to target revenue growth on a comparable basis this year, as well as an improvement in its current EBITDA margin rate.