3D Systems reported flat revenues but saw growth in consumable materials and industrial applications

From Nasdaq: 2024-11-27 14:00:15

3D Systems (NYSE: DDD) held their Q3 2024 Earnings Call on Nov 27, 2024, at 8:30 a.m. ET. The call featured Dr. Jeffrey Graves, president and CEO, and Jeff Creech, EVP and CFO. The company reported flat revenues due to macroeconomic and geopolitical uncertainties affecting customer capex spending. However, there was a 10% growth in consumable materials sales and a 26% rise in revenues from industrial application development. Interest in 3D printing for high-reliability markets like energy, oil and gas, semiconductor equipment manufacturing, and aerospace and defense is increasing, pointing towards future sales growth.

During the call, 3D Systems discussed their Q3 financial results and key accomplishments. The company reported flat revenues due to macroeconomic and geopolitical uncertainties impacting customer capex spending. Despite this, there was a 10% growth in consumable materials sales and a 26% increase in revenues from industrial application development. Interest in 3D printing for high-reliability markets such as energy, oil and gas, semiconductor equipment manufacturing, and aerospace and defense is on the rise, indicating potential future sales growth. Advanced microprocessors in data centers present cooling challenges due to their nanoscale size and high number. High-purity copper elements placed near GPUs can effectively remove heat, aiding data center architects and GPU makers. Additionally, the company focuses on the semiconductor ecosystem for growth, with a strong interest in high-performance automotive markets like F1 racing. Sauber Motorsports recently added 10 production printers to their facility, including eight SLA 750 dual laser printers and two PSLA 270 platforms. This move reflects a nearly 20-year relationship between the companies, showcasing trust in the company’s technological leadership and service capabilities.

The PSLA 270 platform, a new photopolymer printing system, offers a combination of superior surface quality and high resolution, making it a leading choice in the photopolymer applications market. The third quarter saw significant growth in healthcare, with dental and personalized healthcare segments showing impressive performance. However, gross margins were softer than anticipated due to inventory reserves and lower factory utilization, driven by softness in printer volumes. The company continues to invest in R&D while focusing on reducing operating expenses and optimizing working capital for future growth.

3D Systems remains dedicated to innovation, with a focus on R&D even amidst a challenging sales environment. This commitment to research sets them apart in the 3D printing industry, making them a top choice for customers looking for metal and polymer production solutions. The company’s strong cash position, focus on inventory reduction, and commitment to operational efficiency position them well for sustained profitability and future growth. The company introduced nearly 40 new materials, software enhancements, and printing platforms in the last year, with QuickCast Air targeted for the investment casting market expected to reach $34 billion over the next decade. Oqton software with Baker Hughes is streamlining additive manufacturing, while the company expanded its orthopedic surgical planning portfolio with FDA clearance for total ankle patient-matched guides. A single-piece jetted denture solution received FDA clearance, and the company showcased a new Titan extrusion platform at a recent AM conference. Third-quarter revenues were $112.9 million, down 9% from the prior year, with a non-GAAP gross margin of 37.6%. The company reported a decline in gross margins due to lower sales volumes. Operating expenses increased from the prior year but declined sequentially. Adjusted EBITDA for the third quarter was negative, reflecting lower sales volumes and higher expenses. The company reported a loss per share due to noncash charges associated with goodwill impairment. Cash and cash equivalents decreased slightly from the previous quarter. The company expects a mid- to high-single-digit percentage sequential recovery in revenues for the second half of the year. Gross margins are expected to improve in the mid-40% range as volumes recover. Operating expenses are expected to be at or below $60 million for the fourth quarter, leading to an improvement in adjusted EBITDA.

The company is making strides to emerge stronger from the current economic cycle by focusing on R&D and new product development. Revenue guidance for the full year 2024 has been adjusted to $440 million to $450 million. The company expects benefits from inventory management to be modest by year-end. Gross margins are expected to be in the range of 38% to 40%. Operating expenses are expected to be at or below $60 million for the fourth quarter, leading to an improvement in adjusted EBITDA. The company believes that key R&D investments will position them well for growth and profitability. CEO Jeff Graves discussed factors affecting revenue growth in the fourth quarter, including inventory management by customers and potential delays in capital spending. Gross margins may be impacted by factory absorption and mix effects, with an uptick in printer sales potentially affecting margins negatively. The company remains optimistic about revenue growth in 2025, driven by new applications and cost management opportunities. The Application Innovation Group showed strength in the quarter, with revenue generated from developing applications with customers. A 26% rise in revenue stream indicates growing customer demand for new applications, with over 80 applications being developed. The use of AI in semiconductor and data center industries is driving interest, with potential for 3D printed high-value components like heat sinks. Major semiconductor equipment manufacturers are utilizing 3D printing for cost-effective, high-performing parts. Oqton software integration with 3DXpert is enhancing workflow monitoring for increased productivity and quality in parts production. Customers like Baker Hughes are seeing significant improvements in production with real-time monitoring and traceability.

Oqton software is enabling the transition of 3D printing from prototyping to true production, meeting rigorous industry standards for high-reliability parts. The focus on industrial applications like energy, aerospace, and medical markets ensures high productivity and quality in part production. Dental sector remains a key customer, contributing to a 10% customer base in the quarter. In a recent earnings call, executives from a major printing company discussed progress in regenerative businesses, with exciting advancements expected in 2025. The company is working on innovative printing technology for human organ production, particularly lungs, with promising results. Additionally, the company is leveraging regenerative technology for industrial printers, showcasing real technology synergy. The executives expressed optimism for a stronger 2025, citing positive trends in printer platform and consumable sales, along with cost optimization opportunities. The healthcare business, especially orthopedic and dental segments, is performing well, with growth expected in various applications. The company remains focused on advancing its healthcare and industrial solutions. Jeff Graves, President and CEO of a U.S. company, discussed the impact of tariffs and defense focus on their business. With Chinese metal printing companies eyeing U.S. markets, potential tariffs and defense growth could benefit the company. They aim for mid-40s gross margin, supported by in-sourcing efforts and increased factory volumes. Plans to address convertible debt due in 2026 are in progress. The company is optimistic about reaching over 50% gross margin in the long term, driven by new materials and services revenue growth. Metal and polymer applications are promising for future growth. A company recently discussed their financial strategy, aiming to reduce debt and manage maturity dates to improve their financial position by 2025. The healthcare business has shown growth, particularly in orthopedics and trauma applications. The company is diversifying its dental portfolio to mitigate volatility. They have repurchased over $100 million of surplus inventory from contract manufacturers to improve supply chain management and product quality. Despite challenges, the company expects to see continued growth in the healthcare sector and is focused on improving overall operations and cash flow. 3D Systems (NYSE: DDD) recently held their Q3 earnings call with President and CEO Jeff Graves expressing gratitude to investors and wishing everyone a happy Thanksgiving. The call included participants from various financial institutions. For a full transcript of the call, visit The Motley Fool website. The Motley Fool recommends 3D Systems and reminds readers to conduct their own research before making investment decisions. 1. The stock market reached record highs today, with the Dow Jones Industrial Average closing at 30,000 points for the first time in history. This milestone comes amidst positive news about potential COVID-19 vaccines and hopes for economic recovery in the coming months.

2. In international news, tensions are rising between China and Australia as China imposed new tariffs on Australian wine, in what many see as retaliation for Australia’s criticism of China’s handling of the coronavirus outbreak. The move has sparked concerns about a potential trade war between the two countries.

3. On the technology front, Apple announced the launch of its first-ever over-ear headphones, the AirPods Max, priced at $549. The headphones boast high-fidelity audio and noise-canceling capabilities, positioning them as a premium offering in the competitive headphones market.

4. In sports, tennis star Serena Williams has withdrawn from the upcoming Australian Open, citing a lack of preparation time and concerns about the COVID-19 pandemic. Williams’ absence will be felt in the tournament, as she is a seven-time champion and a fan favorite.



Read more at Nasdaq: 3d Systems (DDD) Q3 2024 Earnings Call Transcript