3D Printing Financials: 3D Systems Grapples with Revenue Drop and Delayed Reports

3D Systems (NYSE: DDD) has finally released its first-quarter 2024 financial results after facing significant delays in reporting this year. The company only wrapped up filing its 2023 full-year results with the Securities & Exchange Commission (SEC) in mid-August 2024, which is much later than usual. The delays were mainly due to extended audits and difficulties closing the books for 2023. This process ended up costing the firm a lot more than expected, with fees for external auditors and other services surpassing original estimates by over $7.5 million, pushing the total to more than $9 million.

With the first quarter of 2024 now officially reported, the company’s performance showed many of the ongoing pressures of challenging macroeconomic and geopolitical conditions. Revenue for the quarter stood at $102.9 million, a 15.1% decline from the previous year, primarily driven by a drop in printer sales. Some of this decrease was mitigated by growth in the materials and services sections of the brand, particularly in the healthcare sector, where demand remained steady. In fact, 3D Systems secured a multi-year contract with a leading provider of clear dental aligners, which is expected to be a key driver of future growth in its dental endeavors.

“As a whole, first quarter revenues were slightly below our initial expectations reflecting a soft start to the year, driven by normal seasonality, and compounded by continued scrutiny across customer capital expenditures for additive manufacturing systems,” explained 3D Systems CEO Jeffrey Graves.

Even though the gross profit margin slightly increased to 39.8%, 3D Systems still posted net losses of $16 million, or 12 cents per share, which included roughly $5 million in unforeseen expenses linked to the extended 2023 audit. In general, the company attributed these losses to a combination of lower overall sales volumes and significantly higher operating expenses, driven not only by the audit but also by ongoing restructuring efforts to reduce General and Administrative (G&A) costs by the end of the year.

The increased expenses from the audit were also one of the driving forces behind a negative adjusted EBITDA, which, combined with lower sales volume, resulted in a loss of $20.1 million. Looking ahead, the company has projected second-quarter revenue in the range of $113 to $113.5 million and plans to release its Q2 2024 results on August 29, 2024. The company anticipates improved financial performance as the year progresses despite the challenges faced in the first quarter.

The increased expenses from the audit were also one of the driving forces behind a negative adjusted EBITDA, which, combined with lower sales volume, resulted in $20.1 million. This decline in sales was primarily due to a significant drop in printer sales, with the Industrial Solutions segment experiencing a 20.7% decrease compared to the same period last year. These lower volumes, particularly in the hardware systems sector, were heavily influenced by adverse macroeconomic conditions that affected customer capital expenditures.

The delay in 3D Systems’ financial reporting is unusual and might suggest some operational or financial issues took extra time to sort out. These delays, along with higher-than-expected costs, could have raised concerns among investors. Reflecting these worries, 3D Systems’ stock price has sharply declined throughout 2024. The stock dropped 60.2% since January, falling from $6.35 to $2.52 as of August 21, 2024. However, there was a brief uptick on August 19, just before the company released its first-quarter results.

However, the company is hopeful, with Graves saying that these problems are temporary and that their ongoing restructuring efforts will start showing positive results later this year: “While the impacts associated with the 2023 filing will continue to create a short-term headwind through the third quarter, they will quickly abate and our restructuring initiatives then present a meaningful opportunity to reduce G&A costs by the end of the year. We believe the actions taken to date provide the framework for us to continue investing in mission-critical R&D while driving sustainable profitability in the bright future we see on the horizon ahead. We look forward to providing a comprehensive update on the first half performance and full-year expectations when we file our second quarter results next week.”

Looking ahead, the company projected second-quarter revenues in the range of $113 to $113.5 million and plans to release its second-quarter results on August 29, 2024. As the year progresses, 3D Systems anticipates improved financial performance despite the challenges faced in the first quarter.