3D Systems in Volatile Trade after Q1 Earnings
3D Systems (DDD) has reported disappointing first-quarter (Q1) earnings results for 2024, triggering a notable drop in its stock price which subsequently recovered. The company’s non-GAAP loss widened to 17 cents per share, significantly missing the Zacks Consensus Estimate of a 7-cent loss. This performance marks a deterioration from the loss of 9 cents per share recorded in the same quarter last year.
Revenue Decline Driven by Weak Printer Sales
The company generated $102.9 million in revenue for the first quarter, down 15.1% year over year. This figure also fell short of the consensus mark by 6.4%. The decline was primarily attributed to a significant reduction in printer sales, a result of ongoing macroeconomic challenges impacting hardware demand. However, growth in the materials and services segments provided some relief.
Product revenues, which make up 62.2% of total revenues, plummeted 24.1% year over year to $64.1 million. On the other hand, services revenues saw a modest increase of 5.4%, contributing $38.9 million to the overall revenue mix.
Quarterly Breakdown: Healthcare and Industrial Divisions Struggle
In its Healthcare division, 3D Systems reported a 6.8% decline in revenues, totaling $45.4 million. The drop was mainly due to reduced printer sales to a key orthodontics customer. However, the division benefited from growth in materials and services, partially offsetting the revenue decline.
The Industrial division faced even more significant challenges, with revenues falling 20.7% year over year to $57.5 million. This decline underscores the broader difficulties faced by 3D Systems in maintaining hardware sales amidst a tough economic environment.
Profit Margins and EBITDA Take a Hit
Despite the revenue challenges, 3D Systems managed to improve its non-GAAP gross profit margin by 110 basis points to 40%, achieving a gross profit of $41.2 million. This improvement was largely driven by better operational efficiencies and a favorable product mix. However, this was not enough to offset the broader financial pressures.
The company’s adjusted EBITDA took a sharp hit, nosediving to a negative $20.1 million, compared to a negative $10.1 million in the year-ago quarter. The decline in EBITDA reflects lower total sales volume coupled with an increase in operating expenses, painting a bleak picture of the company’s financial health.
Balance Sheet and Future Outlook
As of March 31, 2024, 3D Systems held cash and cash equivalents of $212 million, down from $331.6 million at the end of December 2023. The company’s total debt also decreased, standing at $211 million, compared to $319.3 million three months earlier.
Looking ahead, 3D Systems has provided guidance for the second quarter of 2024, expecting revenues to range between $113 million and $113.5 million. This projection suggests a potential recovery, but the company still faces significant hurdles.
Stock Performance and Analyst Outlook
Currently holding a Zacks Rank #3 (Hold), 3D Systems has seen its stock plunge 60.3% year to date, a stark contrast to the 22.5% increase in the Zacks Computer & Technology sector. The steep decline in stock price reflects investor concerns over the company’s ability to navigate its ongoing challenges.
3D Systems continues to face a tough operating environment, as evidenced by its disappointingQ1 earnings results. With declining printer sales and mounting operational expenses, the company’s financial outlook remains uncertain. Investors will be closely monitoring the company’s ability to stabilize revenues and improve profitability in the coming quarters.
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