Business Overview
3D Systems Corporation (NYSE: DDD) reported its financial results for the full year 2023, showcasing resilience in the face of a challenging macroeconomic landscape. The company's annual revenue stood at $488,069,000, while the net loss for the year reached $370,432,000. Despite the top-line pressures, 3D Systems demonstrated its ability to optimize operations, with annual operating cash flow of -$80,671,000 and free cash flow of -$107,854,000.3D Systems is a leading provider of comprehensive 3D printing and digital manufacturing solutions, including 3D printers, materials, software, and digital design tools. The company operates in two key industry verticals: Healthcare Solutions and Industrial Solutions. The Healthcare Solutions segment includes dental, medical devices, personalized health services, and regenerative medicine, while the Industrial Solutions segment encompasses aerospace, defense, transportation, and general manufacturing.
3D Systems' comprehensive ecosystem of hardware, software, and materials enables customers to optimize product designs, transform workflows, bring innovative products to market, and drive new business models. The company's technologies and process knowledge enable the production of over a million parts through additive manufacturing each day, catering to a diverse range of industries.
Navigating Macroeconomic Headwinds
The year 2023 proved to be a challenging one for 3D Systems, with revenue declining primarily due to a significant headwind in the company's dental orthodontics business. This segment, which had historically been a significant contributor, saw a 39% year-over-year decline as inflation impacted consumer discretionary spending.Beyond the dental orthodontics segment, broader macroeconomic and geopolitical uncertainties, including the rapid rise in interest rates, also weighed on customer capital spending across various industries. This resulted in a delay in purchase orders, as customers remained cautious about the potential impact on end-user demand. Despite these challenges, the company maintained strong customer engagement, with its advanced applications group working diligently to support new customer applications.
Operational Efficiency and Cost Optimization
In response to the revenue pressures, 3D Systems implemented a comprehensive restructuring initiative aimed at improving internal operating efficiencies and driving long-term value creation. This multi-faceted plan included headcount reductions, site closures, and the optimization of the company's supply chain through insourcing manufacturing activities.The restructuring efforts, coupled with selective price actions to recover inflationary costs, enabled 3D Systems to deliver improved gross margins throughout 2023. The company reported a non-GAAP gross margin of 41.1% for the full year, a 130-basis-point improvement over the prior year. This margin expansion was driven by favorable mix, operating efficiencies, and the positive impact of price increases.
Continued Investment in Growth Initiatives
While navigating the challenging macroeconomic environment, 3D Systems remained committed to investing in its key growth initiatives, particularly in the areas of personalized healthcare and regenerative medicine.In the personalized healthcare space, the company's revenue grew by 12% year-over-year, driven by expanded indications in cranio-maxillofacial, spinal, and foot and ankle applications. 3D Systems expects this segment to continue its strong performance, with the potential to triple revenue over the next five years through geographic expansion and the development of new solutions.
The company's regenerative medicine initiative, which includes efforts in human organ printing, non-organ tissue, and drug development, also remained a strategic priority. 3D Systems' partnership with United Therapeutics to develop the capability to print human lungs progressed significantly in 2023, with the achievement of a critical milestone. Additionally, the company's wholly-owned subsidiary, Systemic Bio, secured its second contract with a leading pharmaceutical company, validating the potential of its organ-on-a-chip platform to accelerate drug discovery and development.
Quarterly Performance
In the fourth quarter of 2023, 3D Systems reported revenue of $114.8 million, a 14% decline compared to the same period in the prior year. This decrease was primarily driven by weakness in printer sales, particularly in the dental market, which offset the strong performance of the company's materials and services offerings.From a segment perspective, the Industrial Solutions business reported fourth-quarter revenues of approximately $64 million, a 12% decline year-over-year. The Healthcare Solutions segment generated $51 million in revenue, down 16% compared to the fourth quarter of 2022. The personalized healthcare business, however, continued to deliver double-digit growth during the quarter.
Outlook
For the full year 2024, 3D Systems expects revenues to be in the range of $475 million to $505 million, reflecting a relatively flat performance compared to 2023. The company anticipates that the continued execution of its restructuring initiatives and operational efficiency programs will drive non-GAAP gross margins in the range of 42% to 44%.On the cost front, 3D Systems expects non-GAAP operating expenses to be between $223 million and $238 million, reflecting the benefits of the restructuring actions taken in 2023. This, combined with the improved gross margin profile, is expected to result in adjusted EBITDA that is breakeven or better for the full year 2024.
Liquidity
As of the end of 2023, 3D Systems maintained a strong cash position, with $331.5 million in cash and cash equivalents. This liquidity, along with the company's focus on working capital optimization through inventory reduction, is expected to support 3D Systems' strategic investments and operational initiatives in the year ahead.In December 2023, the company opportunistically repurchased $135.1 million in notional value of its 0% convertible notes due 2026, further strengthening its balance sheet and providing financial flexibility.