Since the initial 3D printing bubble burst of 2014, investors are keenly watching the industry to see if stocks might rebound. There have been countless executive shakeups across the board, from Stratasys to ExOne to SLM Solutions.
3D Systems is a particularly interesting case, given the ouster of former CEO Avi Reichental in favor of HP legacy Vyomesh Joshi, who was responsible for immense growth in HP’s printing division. Many wonder whether or not Joshi will be able to realign 3D Systems’ vision and direct the company towards a rebound.
With 3D Systems reporting its Q2 results ending June 30, 2017, it may still be too early to tell. Revenue increased to $159.5 million, a 2.6 percent increase from three months ago when revenue was $156.4 million. This is about $3 million less than the company projected. On top of that, the net loss for the quarter was $7.9 million. Guidance for FY17 has been revised to between $643 and $671 million, a 2 to 6 percent growth, and flat earnings per share of $0.46. All of this caused stock prices to fall by 11 percent as of this writing.
In a conference call with investors, Joshi attributed this performance to the sale of professional 3D printers and issues with the Asia Pacific region, saying, “We are pleased with the growth in production printers, materials, software and healthcare in the second quarter, as well as our ongoing progress in on-demand manufacturing services. However, professional printers’ revenue was soft, and our execution geographically was uneven. And we are particularly disappointed in the results in the Asia-Pacific region.”
Specifically, Joshi believed that 3D Systems was unable to keep up with demand for the new ProJet MJP 2500 Wax 3D printer, and, in Asia, the company did well in terms of selling production printers, but not professional systems. He justified issues with sales by saying that the company’s quality and reliability issues were “deeper than [he] thought.”
“I will be the first one to say I was a little bit more optimistic that I could solve the problems and deploy them into the field faster. So I think that was the one issue that probably I miscalculated,” Joshi said. He added that he doesn’t see competition from new entrants like Carbon or HP in the region because of the company’s performance with professional printers.
“We actually sold more [selective laser sintering] units than last year,” Joshi explained. “So I don't see any issue from competition from Carbon or HP. I think it's really our execution, and that's why I want to focus on execution. And the reason for looking at second quarter different – based on second quarter differently, I just wanted to make sure we get confidence in our execution and I think that's the reason on the revising the guidance.”
Total product revenue was down 0.5 percent compared to this time last year, yielding $94.4 million, while services revenue was up almost 3 percent at $65 million however. Printer revenue dropped by 14 percent, with management suggesting that increased demand for stereolithography, selective laser sintering and direct metal printing machines offset lower sales of multijet printers. Of this, Joshi said, “We continue to make improvements in our on-demand manufacturing services and believe our ongoing efforts and investments can result in positive growth in the second half. Printer revenue declined during the second quarter and increased in sales of production printers across all of our technology platforms were offset by softer MJP revenue during the quarter.”
Joshi suggested that the company is still on track to deliver its vision, saying that healthcare, software and materials grew during the second half and that increased manufacturing capabilities will allow the company to meet demand for its new ProJet MJP 2500 Wax 3D printer. In fact, healthcare revenue increased 25 percent over the quarter, software increased 9 percent and materials increased 8 percent.
To improve performance overall, the company plans to speed up cost reductions and invest in research and development with the aim of entering 2018 with an improved product portfolio and streamlined cost structure. 3D Systems aims to solve the quality and reliability issues it found in the company and ensure that the company’s new Figure 4 system for manufacturing comes to market without any of those issues.
You can read the complete Q2 report here.