May 5, 2016 | By Kira
3D Systems today released its first quarter 2016 earnings, revealing a revenue drop of 5.1% to $152.6 million, and earnings staying flat at just 5 cents a share. While rumors had been swirling about a possible HP acquisition, analysts now believe that may be unlikely, as 3D System’s new CEO and former HP executive vice president Vyomesh VJ Joshi took the opportunity during a conference call this morning to establish HP as a “formidable competitor,” while focusing on 3D Systems’ new strategy for growth.
The past year has been a rocky one for 3D Systems, one of the two largest players in industrial 3D printing. In October 2015, long-time president and CEO Avi Reichental departed. Soon after, shares in the company dropped 7 percent, staff layoffs were announced, and the company made a decisive move away from the consumer market by discontinuing the $999 Cube 3D printer for good.
Despite this period of intense change and financial loss, at the end of 2015, 3D Systems still managed to trump Wall Street expectations. Its Q4 and full year 2015 results revealed an unexpected 2% increase in total revenues, causing shares to surge by as much as 15%.
And yet, this roller-coaster ride is far from over. As of this writing, DDD shares are down roughly 6%.
Per the detailed Q1 earnings report, overall revenue decreased 2% year-over-year. At the same time, Executive Vice President and Chief Financial Officer David R. Styka told analysts that the discontinuation of consumer products (a.k.a the Cube) “benefited gross profit margin, which improved to 50.8% in the first quarter.”
Breaking down the revenue a bit further, Styka revealed that demand has remained “soft” for professional 3D printers. Excluding the Cube, 3D printer sales were only $32.5 million, a 17% decrease from Q1 2015, and that revenue from professional 3D printers specifically decreased 23%.
Materials, on the other hand, saw a roughly 5% revenue increase, primarily due to orders from industrial customers. Software also contributed $20.3 million of revenue, or a 22% increase, and healthcare-related applications increased 12% from the same period last year to $33.5 million. “We experienced growth across a broad range of our precision healthcare offerings, including printers and materials, surgical simulation and planning and printing of devices and tools,” said Styka.
The lesson to be taken from these seemingly scattered numbers is that 3D Systems can stay on its feet—and indeed rise once again—with the right strategy. And according to Joshi, that strategy is to set its sights on 3D printing healthcare applications, software, and materials.
3D System's Healthcare Solutions
“As a company, we recognize that we have a lot of work to do. And that we have to do it fast. I spent my first month listening to and learning from employees, customers and partners. I'm now using that knowledge and working with the leadership team to create a clear strategy to drive profitable growth,” he said during the conference call.
“As far as materials are concerned, we are feeling good about the 5% growth that you saw in materials. And we would like to continue that kind of a focus on materials. Software and healthcare are also looking very good for us, because this is the opportunity to continue to drive revenue growth with good margins. So I feel that this approach of having stable growth is that what you can expect from 3D Systems.”
3D Systems' new CEO, Vyomesh Joshi
He added that the company will continue to target the healthcare, aerospace, automobile, and higher education sectors, and to develop professional and metal 3D printer systems. It seemingly has no regrets about dropping the consumer Cube from its lineup.
And as for the rumors concerning an HP acquisition? While Joshi did not address the topic specifically, when asked for his thoughts on HP’s Multi Jet Fusion 3D Printer, he subtly outlined that his former company is only bringing a single product to market, versus 3D Systems’ comprehensive service solutions:
“As far as HP, I'm born and raised in HP. So I have tremendous respect for Hewlett-Packard. No doubt they will bring a quality printer to market. It will be a formidable competitor. They have only one product. So they will have to partner in terms of the software, services.”
The forthcoming HP Multi Jet Fusion 3D printer
Given the ups and downs of the past few quarters, we can't begin to speculate on what 3D Systems' future revenues might look like. However, both Joshi and Styka emphasized that, without a doubt, 3D printing is a "growth market." "It's all about customers and understanding the customers," concluded Joshi. "And our healthcare vertical is a very important indication that we can actually grow the business with a vertical approach, is where I believe we need to focus. We need to focus on where we can delight our customers."
Posted in 3D Printer Company
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