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3D Systems Results Are Mixed, But Still No Solutions

3D Systems released their Q3 2019 financial results

3D printing giant 3D Systems posted their quarterly financial results this week.

I’ve been following the company’s progress in this dimension for years. For many years the company’s stock price soared high, largely driven by mass media interest in the technology, and a notable lack of publicly investable companies.

Stock Price Challenges

However, their stock price crashed when consumer interest dipped, and it has never truly recovered. The company switched around its top management in a significant way shortly thereafter, and continues with that leadership to this day.

However, in spite of significant changes instituted by the leadership in the past few years, 3D Systems seems to be unable to gain back the stock price levels seen in 2014-15. Much of that no doubt has to do with the relatively static financial results that have been posted since then.

3D Systems Revenue Drop

In their most recent financial report, the company indicates their revenue for Q3 has dropped 5.6% over the same quarter’s result last year. 3D Systems explains that some of the loss was due to a corporate divestiture over the summer, but even with that accounted for, there was still a drop in revenue.

The result was another net loss for the quarter of near US$17M, a greater loss than last year. Their cumulative net loss for 2019 is now up to almost US$65M. However, their cash-on-hand seems to be over US$127M, so they are definitely not about to shut down, and have other ways of raising capital if need be.

3D Systems’ CEO, Vyomesh Joshi, explains a reason for the revenue drop:

“The well-known industry decline in manufacturing activity and industrial production has impacted our business this year as overall demand from our customers is down. We also continued to experience revenue headwinds this quarter due to the ordering patterns of a large enterprise customer and the pause we have taken on factory metal systems. From a geographic standpoint, these challenges impacted results in the Americas and Asia Pacific, which was slightly offset by strength in the EMEA region, primarily driven by healthcare.”

The slowdown in manufacturing is indeed true, but on the other hand 3D printing is a small segment within manufacturing and it should be possible to convert conventional tooling to 3D printing regardless. On yet another hand, it may be that the drop in manufacturing has constrained the capital budgets for equipment acquisition and transition to new technologies.

3D Systems Strategy

What is 3D Systems doing about this? They seem to have several strategies in play.

One strategy that seems quite successful is their push into the healthcare sector. That sector itself grew in this quarter’s report by 6%, and Joshi explains further:

“Our healthcare revenue grew 6%, and excluding our large enterprise customer, it grew 15%.”

In other words, their big client didn’t buy much more this quarter, but the other clients surely did.

3D Systems’ materials revenue continued along at much the same levels as before, and this is not surprising. As the company’s equipment requires proprietary materials, the entire installed base of their equipment will require these materials for many years to come, providing a consistent revenue stream.

Another strategy they’ve pursued for a while now and are continuing to do so is a significant reduction in expenses. Joshi explains what happens next:

“In the coming months, we will be accelerating our strategic reductions so that as we enter 2020, we will have the right cost structure for the company.”

That sounds a bit ominous, as it sounds like they will be increasing the degree of reductions. In this quarter, they apparently cut admin expenses by 6% and research & development by a whopping 11%. Joshi’s statement suggests they could cut these expenses by amounts even larger than these figures.

Times continue to be tough at 3D Systems, but they are aware and seem to be taking appropriate actions.

Via 3D Systems

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