3D Systems revenue rises 15% ahead of anticipated “high-margin growth” acquisitions

U.S. 3D printer manufacturer 3D Systems (DDD) has revealed that its revenue rose by 15% during Q3 2021, despite the substantial divestiture drive it has undergone over the last 12 months. 

As revealed in the firm’s financials, it generated revenue of $156 million in the third quarter, $20 million more than the $136 million it brought in during Q3 2020. This recovery was primarily driven by a 28% increase in 3D Systems’ Healthcare income, which grew to $76 million in Q3. Once adjusted for divestitures, the company also achieved 36% annual revenue growth, reflecting the strength of its core offering.

Since its results were released, 3D Systems’ shares have dipped 8% in pre-market trading, but the company itself maintains that the closure of its Oqton and Volumetric Biotechnologies acquisitions, will “position it for continued high-margin growth” moving forwards. 

“We still see continued challenges with COVID-19, and new challenges around supply chains, but thanks to the great work by our team here at 3D Systems, we are pleased to report another strong quarter of double-digit growth,” said 3D Systems’ CEO Dr. Jeffrey Graves. 

“While we were delivering these results through our core portfolio of business, we also completed our divestitures of non-core assets and began the transition to a strategic growth phase,” he added. “Our focus during this phase is investing in significant opportunities that we believe will drive high-margin recurring revenue.”

3D Systems has seen its revenues drop by 28 percent in Q2 2020 when compared to Q2 2019. Photo via 3D Systems.
3D Systems’ revenue returned to pre-pandemic levels during Q3 2021. Photo via 3D Systems.

3D Systems’ Q3 2021 results 

Although 3D Systems still reports its financials under two segments: Products and Services, its divestiture initiative is set to shift its reliance away from the latter. While the firm’s Products division will continue to include any sales generated by its 3D printers, software and materials, from now on, its Services arm will have to rely on its consulting and support offerings, after it sold Quickparts at the end of Q3.

During 3D Systems’ last quarter in which it still had its on-demand manufacturing business, its Services brought in just $47 million, 19% less than the $58 million it reported in Q3 2020. This figure also represents a 23% decline on the $61 million generated by the segment in Q3 2019, as part of a dip that was potentially caused by the aforementioned COVID-19-induced supply issues referenced by Graves.

By contrast, the company’s Products income rose by some 40% between Q3 2020 and Q3 2021, from $78 million to $109 million. Impressively, the division also grew by 15% against the $95 million generated in Q3 2019, and if its divested businesses are excluded from the figures, 3D Systems says that its overall revenue grew 21%, “reflecting the continued strong growth momentum of its business.”

Revenue ($) Q3 2020Q3 2021Difference (%) Q3 2019Q3 2021Difference (%) 
Products 78m109m+4095m109m+15
Services 58m47m-1961m47m-23
Total 136m156m+15155m156mN/A
Cost of Sales78m92m+1888m92m+5
Gross Profit 59m64m+867m64m-4

Targeting post-divestiture expansion 

Q3 2021 started with 3D Systems concluding the strategic refocus it announced back in Q3 2020, by selling its Simbionix business for $305 million. Much like the other sales it has agreed over the past year, 3D Systems’ divestiture was made to allow it to concentrate on its core Industrial and Medical verticals, and saw it generate significant capital that it has ploughed back into its future growth. 

Leveraging this funding, the company has since agreed to buy AI software specialist Oqton for $180 million and acquire bioprinting expert Volumetric Biotechnologies, as part of a deal that could rise to $400 million. While neither deal has been formally completed yet, they’re both set to be finalized in Q4 2021, after which 3D Systems expects them to contribute revenue at a high gross profit margin level.

In the longer term, the firm’s Volumetric Biotechnologies purchase is also expected to allow it to expand on its Print to Perfusion liver bioprinting program, in which it announced “tremendous progress” earlier this year. Following the deal, 3D Systems will now work with United Therapeutics until at least 2025, with the aim of developing two further bioprinted human organs with potential transplantation applications.

When it comes to the strong recent performance of its Products division, meanwhile, the company has attributed this to the “high demand for its printers and materials in dental applications.” The segment’s sales were no doubt bolstered by its new Accura AMX Rigid Black, DMP 3D printing alloys and VisiJet Wax Jewel Red materials as well, which have gained traction within automotive and jewelry respectively. 

Human vasculature model created using 3D Systems' Print to Perfusion process. Image via United Therapeutics.
3D Systems has earmarked its recent acquisitions as being key to driving its future growth. Image via United Therapeutics.

Targeting continued profitability 

It appears that 3D Systems’ recent restructuring has had the desired effect, in that it has managed to reduce its operating expenses to $81.5 million, 35% less than they were in Q3 2020. By streamlining its business, the company has also generated $20.7 million in positive cash flow from operations, allowing it to accumulate $503 million in capital on its balance sheet.

As a result, 3D Systems says that it has the funding needed to combat pandemic-related challenges, and “to support additional growth.” However, ahead of the company’s earnings call, its FY 2021 guidance has focused exclusively on profitability and achieving gross margins 41-43%, while Graves has emphasized that any future expansion will be very much in this vein as well. 

“I couldn’t be more pleased with our performance this quarter, both organically and inorganically,” concluded Graves. “We will continue to focus investment in areas that we believe solve customers’ complex needs, drive adoption of additive manufacturing, and generate high margin, recurring revenue streams.”

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Featured image shows 3D Systems’ headquarters in Rock Hill, South Carolina. Photo via 3D Systems.