Leading 3D printer OEM 3D Systems has reported its financial results for the second quarter of 2019. For the three months ended June 30, 2019, the company has reported an 11% fall in total revenue to $157.3 million from $176.6 million in Q2 2018. Following the release of the Q2 2019 results, 3D Systems’ share price dropped from $8.16 to $6.88.
Despite this, the company has reported a 46.4% increase in printer unit sales for Q2 2019 compared to the same period in 2018. Speaking with analysts and investors, John McMullen, Executive Vice President and Chief Financial Officer, 3D Systems, explained that the unit sales increase was led by the Figure 4 platform. Yet, 3D printer revenue decreased overall due to “year-over-year timing of a large enterprise customer’s orders, and the decision not to ship DMP Factory solutionsduring the quarter and the softer macroeconomic industrial environment.”
“EXPECTED REVENUE HEADWINDS CONTINUED THIS QUARTER BASED ON THE ORDERING PATTERNS OF A LARGE ENTERPRISE CUSTOMER AND THE PAUSE WE HAVE TAKEN ON FACTORY METALS SYSTEMS AS WE COMPLETE TECHNICAL ENHANCEMENTS TO ENSURE THE QUALITY AND RELIABILITY LEVELS, MEET OUR EXPECTATIONS FOR HIGH VOLUME PRODUCTION ENVIRONMENT.”
3D Systems revenue by segment
3D Systems revenue is reported in two segments: Products and Services. Products relate to sales of hardware, software, and consumables, whereas Services encompasses on-demand manufacturing and design consultancy offerings. For Q2 2019, Product revenue dropped by 15.36 percent to $93.7 million from $110.7 million in Q2 2018. Within this, there was a 27.4 percent decrease in 3D printer revenue compared to Q2 2018.
| Revenue | Q2 FY2019 | Q2 FY2018 | Variance ($) | % |
| Products | 93,758 | 110,785 | -17,027 | -15.36% |
| Services | 63,514 | 65,783 | -2,269 | -3.44% |
| Total Segments | 157,272 | 176,568 | -19,296 | -10.92% |
There was also a reported 3.44 percent decline in Services revenue with $63.5 million in Q2 2019 from $65.7 million in Q2 2018. This followed a decline in Healthcare services and simulation revenue as well as on-demand services revenue.
McMullen comments, “healthcare revenue increased 11.4%. We continue to be pleased with the overall demand trends for healthcare, including our NextDent 5100 3D printer.”
3D Systems activity for Q2 2019
During Q2 2019, 3D Systems was awarded a $15 million machine development contract from the Combat Capabilities Development Command of the U.S. Army Research Laboratory (ARL) to create “the world’s largest, fastest, most precise metal 3D printer.” The company also opened a new Advanced Additive Manufacturing Center in Pinerolo, Italy to broaden the its On Demand manufacturing service in Europe.
The popularity of the Figure 4 system was also highlighted by the release of a new model in this quarter. At RAPID+TCT 2019 in May, the company announced the general availability of the Figure 4 Modular scalable 3D printing solution at an entry cost of $49,900, as well as the release of five new materials.
Managing operating costs
3D Systems generated $18.7 million in cash from operations during Q2 2019, and had $150.4 million of unrestricted cash on hand at June 30, 2019. Improvements in working capital, including planned reductions of inventory, were a driving factor of cash generation during the period.
“I am pleased with the progress we are making on our cost structure, and we will continue to be laser-focused on additional reduction opportunities in the second half of the year,” added Vyomesh “VJ” Joshi, President and CEO of 3D Systems.
GAAP operating expenses for Q2 2019 were reported at a decrease of 1.5 percent to $92.5 million, from $93.9 million in Q2 2018. GAAP selling, general, and administrative (SG&A) expenses increased by 0.7 percent in Q2 2019 to $71.7 million,this includes a $3.5 million dollar litigation settlement during the second quarter of 2019.
VJ continued, “Operating expenses declined as a result of our cost reduction plans, beginning to take hold, as discussed over the past couple of quarters.”
In addition, GAAP R&D expenses for this quarter decreased by 8.4 percent at $20.8 million. As a result of cost reduction plans, Q2 2019 non-GAAP operating expenses decreased by 9.3 percent to $71.7 million compared to $79.0 million in the second quarter of 2018.
“WE REMAIN CONFIDENT IN OUR BROAD PORTFOLIO OF ADDITIVE CAPABILITIES, WORKFLOW SOLUTIONS AND OVERALL MARKET OPPORTUNITIES; AND WE REMAIN KEENLY FOCUSED ON EXECUTING ON OUR STRATEGY, REDUCING COSTS AND DRIVING LONG-TERM PROFITABLE GROWTH.”
3D Systems’ financial earnings for the second quarter and first half of 2019 can be found in full here.
Byron Shaw 