For the first quarter ended March 31, 2021, 3D Systems delivered a combination of growth and profits. A leader in the 3D printing segment, the company reported 7.7% revenue growth, beating Wall Street estimates. Following the report’s release on May 10, 2021, shares were up 14.5% in after-hours trading and rocketed 35% by market closing on the following day. The quarter’s growth was mainly attributed to its healthcare business. Rising demand for new medical and dental applications helped boost commercial growth, leading the firm to announce the expansion of its Denver facility by 50% and acquisition of startups to become better positioned across a broader market spectrum, which includes regenerative medicine.
Additive manufacturing (AM) companies are beginning to rebound from the pandemic-related unprecedented financial crisis as Covid vaccines roll out and lockdown restrictions are lifted. 3D Systems noted that, as the U.S. economy began to reopen in late 2020, its products and applications gained momentum, with organic growth accelerating and profitability and cash from operations increasing dramatically. This is reflected in the first earnings report of the year, which shows sales of $146.1 million, compared to $135.6 million in the same quarter last year.
The company’s bottom line reveals quarterly earnings of $45.2 million or 17 cents per share, beating the Zacks Consensus Estimate of 3 cents per share. This compares to a loss of $18.9 million or 4 cents per share a year ago. Driven by strong product revenues mainly from printers and followed by materials and software sales, the results reflect strong performance in healthcare and continued stabilization of its industrial segment.
Revenue from products increased 17.4% and represented 64% of the total quarterly revenue, while services saw a decrease of more than 6%. The healthcare business had a strong quarter with revenue growing 38.7% year-over-year to $72.5 million, fueled by an increase in hardware and material sales in dental and medical applications as the demand for personalized health services and advanced manufacturing of medical devices peeks. To support the future growth of this business, 3D Systems recently announced a planned expansion in its Denver, Colorado facility, followed by two new acquisitions.
The newly acquired technology startups will play an important role moving forward. Much of the incentive behind these targeted acquisitions include revenue growth, driving improvements to margins, and adjusted EBITDA. Philadelphia-based bioprinting developer Allevi will help 3D Systems expand its regenerative medicine focus into the lab, leveraging the overall scale of the healthcare business to meet emerging regenerative application needs.
Powered by Aniwaa
As for German software company Additive Works, the acquisition could help 3D Systems further enhance its software portfolio and innovation capacity by integrating products and expertise, dramatically reducing setup times and post-processing requirements while improving product performance yield. According to Executive Vice President and Chief Financial Officer at 3D Systems, Jagtar Narula, while these and future acquisitions will not be material to 2021 earnings results, they are set to become a key component of a long-term strategy to reach double-digit revenue growth, gross profit margins of 50% and adjusted EBITDA margins of 20%.
As for its industrial sales, the company reported a decrease of 11.7% to $73.6 million, compared to the same period last year. During the quarter’s earnings call, CEO Jeffrey Graves said that there are several strong verticals in the industrial segment that will both lead and trail in the opening economy. Particularly driven by a megatrend in electric vehicles, the use of additive in automotive is doing very well. The same can be said about data center cooling manufacturing, the commercial space industry, and applications in semiconductor chip manufacturing. At the same time, aerospace – a formerly large segment for additive – has been heavily impacted by the pandemic. The team of creative engineers at 3D Systems is working on unique components to enable the newest generation of commercial rockets for space travel, revolutionary equipment for the manufacture of semiconductor chips, and much more.
The market for industrial-scale AM is here today, said, Graves. In fact, 3D Systems technologies are used to print approximately 0.75 million production components per day, which equals 250 million components per year and climbing. Company management said it made a very strong turnaround since March 2020 and is now growing profitably, generating cash and maintaining available liquidity. Hoping to provide more detail to the investment community on its strategy, 3D Systems plans to hold an Investor Day in Denver on September 9, 2021, to discuss long-range targets, mass customization through additive, and specifically its focus on the fastly growing and higher margin producing healthcare segment.