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3D Systems takes a hit in FY2023 with revenues declining by 9.3%

The company blames significant softness in dental orthodontics and depressed printer sales

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3D Systems took a hit in Q4, with revenues of $114,848 declining by 13.5% compared to Q4 2022 due to significant softness in dental orthodontics and depressed printer sales from delayed customer capex investments. This led to a decrease in yearly revenues as well, with 3D Systems FY2023 sales of $488,069 decreasing by 9.3% compared to FY2022 revenue of $538,031. The slowing dental sales – which declined by a total of 39% from the peak levels of 2022 – may also be related to 3D Systems’ client Align Technology acquiring its own 3D printing company, Cubicure, although both companies had said this investment would not impact the existing relationship.

3D Systems takes a hit in FY2023 with revenues declining by 9.3%, blaming significant softness in dental orthodontics
Dr. Jeffrey Graves, President and CEO of 3D Systems.

Commenting on 3D Systems FY2023 results and the outlook for 2024, Dr. Jeffrey Graves, President and CEO of 3D Systems said, “Our fourth quarter revenue results reflect the significant headwinds created by ongoing macroeconomic and geopolitical volatility. As we exited the third quarter, we had expected some of these broader pressures to moderate through year-end, as the historical seasonality of increased consumption and year-end customer capex spending would typically translate to an acceleration of revenues in the fourth quarter. While customer-driven pre-sales activities did accelerate as expected in the quarter, the same cannot be said for revenue. Fortunately, based upon customer feedback, we view this as a market timing issue rather than any permanent trend in customer adoption rates for additive manufacturing, or a loss of market share for 3D Systems.”

Among the more favorable news, the 2023 gross profit margin of 40.7% increased from the 2022 gross profit margin of 39.8%. 2023 Non-GAAP gross profit margin(1) of 41.1% increased from 2022 Non-GAAP gross profit margin of 39.8%, primarily driven by improved operational efficiencies and favorable mix.

More specifically, 3D Systems’ Healthcare Solutions revenue decreased 18.3% to $213,216, compared to the prior year, and revenue on a constant currency basis decreased 18.6% year over year. Industrial Solutions revenue decreased 0.8% to $274,853 compared to the prior year, and revenue on a constant currency basis decreased 1.1% year over year.

“Reflecting on 2023 in its entirety, the most influential driver to our revenue performance was our dental orthodontic product line, with revenues declining 39% from 2022 levels and essentially cut in half from their peak in 2021. However, adding to the pressure from this market was a sluggishness broadly in capex spending on new production capacity by both our Healthcare and Industrial customers. These combined effects resulted in a significant revenue headwind for 2023. In response to this softness, we’ve undertaken a comprehensive restructuring initiative to reduce costs, improve margins through greater efficiencies, and keep the company solidly on a path for sustained profitability and positive operating cash flow. The rise in gross margins, even in the face of declining volumes in 2023, is an early indicator of these efficiency improvements, which we expect to continue throughout 2024.”

Net loss attributable to 3D Systems Corporation for the full year 2023 increased by $247,721 to a loss of $370,432 compared to the prior year. The increase in net loss attributable to 3D Systems Corporation primarily reflects an impairment of goodwill and other intangible assets, lower revenue and an increase in operating expenses associated with investments in our Regenerative Medicine business and an increase in consulting and outside services expenses.

Adjusted EBITDA decreased by $18,744 to a loss of $24,525 in 2023 compared to last year primarily driven by the unfavorable impact of lower volumes from dental orthodontics markets and an increase in operating expenses associated with investments in Regenerative Medicine and an increase in consulting and outside services expenses.

“It is important to note that we are different from others in the additive manufacturing industry in that we have the broadest range of technology platforms, which we bring to market through two focused business units, Healthcare and Industrial Solutions. These platforms span metals, polymers and biologics, and, by necessity, require deep expertise in hardware, software and materials development. This technology foundation, in which we have been heavily investing for the last two years, along with industry-leading operational scale and an outstanding global reach, give us an ability to continue taking cost out of our business while preserving the critical investments needed to support the exciting growth opportunities we see ahead. Our goal is to balance short-term profitability and cash performance in 2024, with the need to ensure continuity in essential R&D investments for growth. This balance is critical for two reasons. First, risks remain in the world economic outlook, which could continue to impact sales in the short term. However, offsetting this pressure are a number of very targeted key-customer applications we expect to bring to market over the next 12-18 months. Fortunately, to execute these restructuring and investment plans, we have a strong balance sheet with over $300 million in cash, and 0% interest debt that is not due until late 2026. This gives us an ability to thoughtfully restructure the business to drive profitability and cash performance, while supporting key customer-driven development programs that we believe will add meaningfully to our top line revenues in the years ahead.”

In December 2023, the company repurchased $135,130 of its Convertible Senior Notes (“Convertible Notes”) for $100,614 including transaction expenses, opportunistically reducing its outstanding debt by nearly 30% at a substantial discount to par value. Cash and cash equivalents of $331,525 position the company well for support of restructuring and efficiency initiatives, as well as continuity in key growth investments.

Dr. Graves concluded, “Given the continuing risks we see to the world economy, we expect moderating but continued sales pressures, which we are translating into relatively flat top line revenue expectations for the year. Given this, we will prioritize completion of our previously announced restructuring program, which includes headcount reductions, significant site consolidations and a reduction in external spending. We believe these efforts, which will largely be completed by mid-year, will favorably impact both COGS and OPEX, further improve gross margins, and deliver positive adjusted-EBITDA performance and operating cash flow for the full year. In parallel, we will continue our most important development programs that are now, after over two years of increased R&D investment, beginning to yield exciting results. We expect these new additive solutions to materially change the way products are designed and manufactured and healthcare is delivered. We believe the path forward is very clear. In the short term, we will manage our costs to deliver improving margins and cash performance in the face of economic uncertainty. As these clouds then lift, the opportunities for growth in our industry remain incredibly bright. We believe that this focus on our strategic initiatives will harmonize the ability to deliver sustainable profitability this year, while preserving the exceptional opportunities we have to deliver long-term shareholder value in the years ahead.”

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