3D Systems (NYSE: DDD) closed its third quarter of 2024 with mixed results, navigating macroeconomic pressures while leaning on innovation to shape its future.The company reported a challenging sales environment for its hardware systems but saw encouraging growth in its consumables and healthcare segments.Despite these hurdles, 3D Systems remains optimistic about the demand for its Application Innovation Group (AIG), a team dedicated to developing new 3D printing applications for industrial and healthcare customers, and the steady rollout of new products to boost long-term growth.In the third quarter, the company reported revenues of $112.9 million, a 9% decrease year-over-year, driven largely by a slow market for printer sales.
However, consumables sales rose nearly 10%, demonstrating strong use of the installed base.The healthcare segment delivered a silver lining, growing 5% year-over-year to $55.1 million, fueled by a recovery in dental and personalized healthcare solutions.Gross profit margin declined to 36.9%, impacted by higher costs from additional inventory reserves and inefficiencies caused by lower production and sales volumes.
Excluding certain charges, the adjusted gross profit margin was 40%.The company’s financial difficulties worsened this quarter due to a large accounting loss from reducing the value of goodwill and long-term assets, leading to a net loss of $178.6 million, or $1.35 per share.Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also declined to a negative $14.3 million, driven by lower revenues and higher costs.During an earnings call with investors, CEO Jeffrey Graves stressed that “macroeconomic and geopolitical uncertainties have caused our customers to reduce CAPEX spending for new capacity in their factories, which in turn has created a persistent headwind to hardware system sales.This was slightly weaker than we had anticipated as a few key installations of new systems, which were targeted for acceptance late in Q3, slipped into the fourth quarter.
However, while the sale of new printing systems is still sluggish, what is changing for the better is the utilization rate of our installed base as indicated by rising sales of consumables to our customers.”3D Systems at Formnext 2024.Healthcare remains a key strength for 3D Systems, with strong growth in dental applications and personalized healthcare solutions.The U.S.Food and Drug Administration (FDA) approval of a multi-material jetted denture, developed with dental lab Glidewell, is an important step in the dental market.
At the same time, the company’s work on trauma applications, such as customized devices for treating bone fractures and injuries, and new orthopedic solutions, including patient-specific tools like total ankle replacement guides, is expected to keep healthcare growing.On the industrial side, the AIG group posted a robust 26% year-to-date revenue growth, driven by high-reliability markets like aerospace, defense, and semiconductor manufacturing.Graves brought attention to the group’s work on advanced copper heat sinks for data centers, which are seeing increased demand due to artificial intelligence (AI)-related investments.“One market I’m particularly excited about is driven by the trillion-dollar investments in AI.These investments cascade directly into several of our targeted end markets, ranging from semiconductor equipment manufacturing to data centers to the power generation equipment needed to provide electricity critical to their operation,” explained Graves.For example, managing heat is critical for silicon chips and GPUs (Graphics Processing Units), says Graves, where high-purity copper elements manufactured with 3D printing play a vital role in cooling.
Combining the inherent capability of 3D printing to manufacture complex high-surface area components with 3D Systems’ unique ability to use ultra-high purity copper with advanced metal printing systems gives GPU and data center architects a powerful means of removing heat effectively from the system.Given that data centers now consume as much power as some small countries, this capability is increasingly valuable.3D Systems at Formnext 2024.A key focus for 3D Systems has been its transition to in-house manufacturing, driven by dissatisfaction with the quality, speed, and inventory management of its previous contract manufacturers.Graves said that by bringing production in-house, the company aims to take full control of its operations to improve product quality, reduce costs, and speed up new product launches.
While this change initially resulted in higher inventory levels and short-term costs, the executive believes it is critical for achieving long-term efficiency and profitability.The strategy allows the company to better align production with demand, ensure consistent standards and lay the groundwork for sustained growth as volumes increase.Graves noted that 3D Systems introduced 25 new products this year alone, covering hardware, materials, and software, with nearly 40 launches since the third quarter of 2023.Among these is the PSLA 270 photopolymer printer, born from the company’s regenerative medicine research.
It combines high precision with faster print speeds, positioning it as a potential industry leader in photopolymer applications.The company also talked about its cost discipline, achieving a $2.7 million sequential reduction in operating expenses in Q3 and setting a goal to bring expenses below $60 million in Q4, primarily through reductions in general and administrative (G&A) costs.This, combined with improved cash management and inventory reductions, is aimed at positioning the company for future profitability.Alongside these cost control efforts, 3D Systems continues to prioritize R&D, which Graves described as the backbone of the company’s innovation strategy: “While our overall operating expenses are declining, we continue to invest extensively in our R&D activities, which is fueling a historic year of product innovation for our company,” said Graves.He added, “As the inventor of the technology that birthed the 3D printing industry, our dedication to innovation is a core element of our company culture.
Maintaining momentum with mission-critical R&D even through a challenging sales environment is not only fundamentally different than most of our peers but it’s embedded deeply in our DNA.”3D Systems at Formnext 2024.3D Systems updated its full-year revenue forecast to $440 million to $450 million, citing ongoing economic uncertainties.Gross profit margins are expected to range between 38% and 40%, with adjusted EBITDA expected to improve in the last quarter of 2024.However, the company is cautious about Q4 spending and inventory adjustments by its customers, which could affect the timing of revenues.Looking ahead to 2025, Graves said he is optimistic about potential growth driven by increasing customer interest in 3D printing applications, particularly in high-value industrial markets.
However, he said there is still uncertainty around current geopolitical and economic conditions.Images courtesy of 3D Systems via LinkedIn.Subscribe to Our Email NewsletterStay up-to-date on all the latest news from the 3D printing industry and receive information and offers from third party vendors.
