ROCK HILL, South Carolina - February 27, 2024 - 3D Systems Corporation (NYSE:DDD) announced today its financial results for the fourth quarter and full year ended December 31, 2023.
Fourth Quarter Financial Results (Unaudited)
(All numbers are unaudited and are presented in thousands, except per share amounts or otherwise noted)
- Q4 2023 revenue of $114,848 decreased13.5% compared to Q4 2022 due to significant softness in dental orthodontics and depressed printer sales from delayed customer capex investments
Q4 2023 gross profit margin of 40.4% and Non-GAAP gross profit margin(1) of 41.9%. Non-GAAP gross profit margin represents an increase from prior year primarily driven by product mix
Q4 2023 Net loss of $300,412, diluted loss per share of $2.30, primarily driven by the non-cash impairment of goodwill and other intangible assets, and Non-GAAP diluted loss per share(1) was $0.11
Q4 2023 Adjusted EBITDA(1) decreased by $7,452 to a loss of $12,260, primarily driven by lower revenue and an increase in operating expenses associated with investments in Regenerative Medicine and a short-term increase in consulting and outside services expenses
Full Year 2023 Financial Results (Unaudited)
(All numbers are unaudited and are presented in thousands, except per share amounts or otherwise noted)
2023 revenue of $488,069 decreased9.3% compared to 2022 revenue of $538,031, primarily driven by the exceptional softness in dental orthodontics and slower printer hardware sales
2023 gross profit margin of 40.7% increased from 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
2023 net loss of $370,432, diluted loss per share of $2.85, primarily driven in large part by the non-cash impairment of goodwill and other intangible assets, and Non-GAAP diluted loss per share(1) was $0.26
2023 Adjusted EBITDA(1) decreased by $18,744 to a loss of $24,525, primarily driven by lower revenue and an increase in operating expenses associated with investments in Regenerative Medicine and an increase in consulting and outside services expenses
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
Summary Comments on Results
Commenting on 2023 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 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.”
“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.”
“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.”
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.”
Summary of Fourth Quarter Results (Unaudited)
Revenue for the fourth quarter of 2023 decreased 13.5% to $114,848 compared to the same period last year, and revenue on a constant currency basis decreased 14.7%. The decline of revenue primarily reflects lower sales to certain dental orthodontic market customers and lower printer sales more broadly throughout the remaining portfolio due to macroeconomic factors that are negatively impacting demand.
Healthcare Solutions revenue decreased 15.7% to $51,188 compared to the prior year period, and revenue on a constant currency basis decreased 16.4% year over year.
Industrial Solutions revenue decreased 11.6% to $63,660 compared to the prior year period, and revenue on a constant currency basis decreased 13.3% year over year.
Gross profit margin for the fourth quarter of 2023 was 40.4% compared to 41.2% in the same period last year. Non-GAAP gross profit margin was 41.9% compared to 40.9% in the same period last year and increased primarily due to favorable mix.
Net loss attributable to 3D Systems Corporation increased by $274,859 to a loss of $300,412 in the fourth quarter of 2023 compared to the same period in the prior year. The increase in net loss attributable to 3D Systems Corporation primarily reflects $297,689 related to the impairment of goodwill and other intangible assets.
Adjusted EBITDA decreased by $7,452 to a loss of $12,260 in the fourth quarter of 2023 compared to the same period last year primarily driven by lower revenue and an increase in operating expenses associated with investments in Regenerative Medicine and an increase in short-term consulting and outside services expenses.
Summary of Full-Year 2023 Results (Unaudited)
Revenue for 2023 of $488,069 decreased 9.3% compared to the prior year. Revenue on a constant currency basis decreased 9.6%. The decline in revenue primarily reflects lower sales to certain dental orthodontic market customers due to macroeconomic factors that are negatively impacting demand.
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.
Gross profit margin for the full year 2023 was 40.7% compared to 39.8% in the prior year. Non-GAAP gross profit margin was 41.1% for the full year 2023 compared to 39.8% in the prior year. Gross profit margin increased primarily driven by improved operational efficiencies and favorable mix.
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.
2024 Outlook
The company is providing full-year 2024 financial guidance as follows:
Revenue: $475 - $505 million
Non-GAAP Gross Profit Margin: 42% - 44%
Non-GAAP Operating Expense: $223 - $238 million
Adjusted EBITDA: Break even or better
Financial Liquidity (Unaudited)
At December 31, 2023, cash and cash equivalents and short-term investments totaled $331,525 and decreased $237,212 since December 31, 2022. This decrease resulted primarily from the repurchase of our Convertible Notes of $100,614, cash used in operations of $80,671, acquisitions and other investments, net of cash acquired, of $29,152, capital expenditures of $27,183, and taxes paid related to net-share settlement of equity awards of $5,211, offset by a $3,492 effect of exchange rate changes on cash, cash equivalents and restricted cash. At December 31, 2023, the company had total debt, net of deferred financing costs of $319,356.
Status of Audit; Delayed Form 10-K Filing
The unaudited financial data above remains subject to audit as the company continues its close process. Accordingly, actual results may differ from the anticipated results shown above.
3D Systems will delay the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and file a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission, which extends the deadline to file the Form 10-K. The delay in filing is primarily due to additional time required by the company to complete its financial reporting close procedures. It has no impact on the company's operations or on its ability to discuss its anticipated 2023 results and 2024 outlook.
Q4 and FY 2023 Conference Call and Webcast
The company will host a conference call and simultaneous webcast to discuss these results on February 28, 2024, which may be accessed as follows:
Date: Wednesday, February 28, 2024
Time: 8:30 a.m. Eastern Time
Listen via webcast: www.3dsystems.com/investor
Participate via telephone: 201-689-8345
A replay of the webcast will be available approximately two hours after the live presentation at www.3dsystems.com/investor.
Forward-Looking Statements
Certain statements made in this release that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In many cases, forward looking statements can be identified by terms such as “believes,” “belief,” “expects,” “may,” “will,” “estimates,” “intends,” “anticipates” or “plans” or the negative of these terms or other comparable terminology. Forward-looking statements are based upon management’s beliefs, assumptions and current expectations and may include comments as to the company’s beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors described under the headings “Forward-Looking Statements” and “Risk Factors” in the company’s periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements. Although management believes that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at which such performance or results will be achieved. The forward-looking statements included are made only as the date of the statement. 3D Systems undertakes no obligation to update or revise any forward-looking statements made by management or on its behalf, whether as a result of future developments, subsequent events or circumstances or otherwise, except as required by law.
Presentation of Information in this Press Release
3D Systems reports its financial results in accordance with GAAP. Management also reviews and reports certain non-GAAP measures, including: non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP diluted income (loss) per share, and Adjusted EBITDA. These non-GAAP measures exclude certain items that management does not view as part of 3D Systems’ core results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results. Management believes that the non-GAAP measures provide useful additional insight into underlying business trends and results and provide meaningful information regarding the comparison of period-over-period results. Additionally, management uses the non-GAAP measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. 3D Systems’ non-GAAP measures are not calculated in accordance with or as required by GAAP and may not be calculated in the same manner as similarly titled measures used by other companies. These non-GAAP measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.
To calculate the non-GAAP measures, 3D Systems excludes the impact of the following items:
amortization of intangible assets, a non-cash expense, as 3D Systems’ intangible assets were primarily acquired in connection with business combinations;
costs incurred in connection with acquisitions and divestitures, such as legal, consulting and advisory fees;
stock-based compensation expenses, a non-cash expense;
charges related to restructuring and cost optimization plans, impairment charges, including goodwill, and divestiture gains or losses;
certain compensation expense related to the 2021 Volumetric acquisition; and
costs, including legal fees, related to significant or unusual litigation matters.
Amortization of intangibles and acquisition and divestiture-related costs are excluded from non-GAAP measures as the timing and magnitude of business combination transactions are not predictable, can vary significantly from period to period and the purchase price allocated to amortizable intangible assets and the related amortization period are unique to each acquisition. Amortization of intangible assets will recur in future periods until such intangible assets have been fully amortized. While intangible assets contribute to the company’s revenue generation, the amortization of intangible assets does not directly relate to the sale of the company’s products or services. Additionally, intangible assets amortization expense typically fluctuates based on the size and timing of the company’s acquisition activity. Accordingly, the company believes excluding the amortization of intangible assets enhances the company’s and investors’ ability to compare the company’s past financial performance with its current performance and to analyze underlying business performance and trends. Although stock-based compensation is a key incentive offered to certain of our employees, the expense is non-cash in nature, and we continue to evaluate our business performance excluding stock-based compensation; therefore, it is excluded from non-GAAP measures. Stock-based compensation expenses will recur in future periods. Charges related to restructuring and cost optimization plans, impairment charges, including goodwill, divestiture gains or losses, and the costs, including legal fees, related to significant or unusual litigation matters are excluded from non-GAAP measures as the frequency and magnitude of these activities may vary widely from period to period. Additionally, impairment charges, including goodwill, are non-cash. Furthermore, the company believes the costs, including legal fees, related to significant or unusual litigation matters are not indicative of our core business' operations. Finally, 3D Systems excludes contingent consideration recorded as compensation expense related to the 2021 Volumetric acquisition from non-GAAP measures as management evaluates financial performance excluding this expense, which is viewed by management as similar to acquisition consideration.
The matters discussed above are tax effected, as applicable, in calculating non-GAAP diluted income (loss) per share.
Adjusted EBITDA, defined as net income, plus income tax (provision) benefit, interest and other income (expense), net, stock-based compensation expense, amortization of intangible assets, depreciation expense, and other non-GAAP adjustments, all as described above, is used by management to evaluate performance and helps measure financial performance period-over-period.
A reconciliation of GAAP to non-GAAP financial measures is provided in the accompanying schedules.
3D Systems does not provide forward-looking guidance for certain measures on a GAAP basis. The company is unable to provide a quantitative reconciliation of forward-looking non-GAAP gross profit margin, Adjusted EBITDA, and non-GAAP operating expense to the most directly comparable forward-looking GAAP measures without unreasonable effort because certain items, including litigation costs, acquisition expenses, stock-based compensation expense, intangible assets amortization expense, restructuring expenses, and goodwill impairment charges are difficult to predict and estimate. These items are inherently uncertain and depend on various factors, many of which are beyond the company’s control, and as such, any associated estimate and its impact on GAAP performance could vary materially.
About 3D Systems
More than 35 years ago, 3D Systems brought the innovation of 3D printing to the manufacturing industry. Today, as the leading additive manufacturing solutions partner, we bring innovation, performance, and reliability to every interaction - empowering our customers to create products and business models never before possible. Thanks to our unique offering of hardware, software, materials and services, each application-specific solution is powered by the expertise of our application engineers who collaborate with customers to transform how they deliver their products and services. 3D Systems’ solutions address a variety of advanced applications in Healthcare and Industrial Solutions markets such as medical and dental, aerospace & defense, automotive and durable goods. More information on the company is available at www.3dsystems.com
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