The plans were announced by Jeffrey Graves, CEO of 3D Systems, in August 2020.
It was his first outing as the company's CEO, he has been serving at once since May 2020. The strategic vision refocusing on the healthcare industry and an industrial segment. The plan included reducing operating costs by
The prices of company shares plummeted from $7.06 to $6.12: a 11 percent reduction, following the release of the quarterly figures. An equity offering program was announced at the same time.
Jeffrey Graves explained why restructuring would be needed. He cited maximizing efficiency while reducing operating costs. Workforce cuts were mentioned as “a difficult but essential step in our ongoing strategic process”.
The financial results included a 28 percent revenue drop for Q2 2020 compared to the year before.
Q2 2020 Revenue
Q2 includes April, May and June. Compared to Q2 2019, when the company generated net revenue of $157.3 million, the results of Q2 2020 were poor in comparison: $112.1 million. This is a 28 percent drop. Overall net revenue generated in the first half of 2020 also saw a 20 percent reduction compared to the previous year. It’s reported across the Products and Services divisions.
Revenues (" class="formula inline">) | Q1 2020 | Q1 2019 | Variance (%) | H1 2020 | H1 2019 | Variance (%) |
Products | 61.4m | 93.7m | -34 | 140.3m | 186.1m | -24 |
Services | 50.5m | 63.5m | -20 | 106.4m | 123.1m | -13 |
Total Revenues | 112m | 157.2m | -28 | 246.7m | 309.2m | -20 |
Revenue generated by the Products division saw a 34 percent drop compared to Q2 2019. The results of the first six months were also not looking too bright: a 24 reduction compared to H1 2019.
Healthcare products and industrial solutions also provided decreased revenue. The Services division also didn’t avoid the drop: a 20 percent and 13.5 percent reductions for Q2 and H1 respectively.
The table below provides more detailed information.
Operating expenses ($) | Q1 2020 | Q1 2019 | Variance (%) | H1 2020 | H1 2019 | Variance (%) |
Selling, general and admin | 52m | 71m | -27 | 108.1m | 136.7m | -21 |
Research and development | 16.9m | 20.8m | -19 | 36.2m | 42.7m | -14 |
Total operating expenses | 69m | 92.4m | -25 | 144.3m | 179.4m | -20 |
Reducing expenses is nothing new for 3D Systems, the company started deploying it even before the results of Q2 2020 became clear. The reason was the global pandemic of Covid-19. The operational costs were significantly reduced: $69 million in Q2 2020 compared to $92.4 million from Q2 2019.
The pandemic caused many other 3D technology companies to do the same since the customer demand significantly decreased. For example, Stratasys reduced its workforce by 10 percent.
Inventory of 3D Systems had some growth in the middle of 2020 compared to the year before (11 percent growth). The assets had a significant drop but it included money put towards paying off debt.
The restructuring plan involved saving $100 million over the course of 18 months after announcement (the results of the long-standing plan were clearly seen during 2021). .
The efficiency saving plan
Graves stressed the importance of simplicity caused by restructuring. The plan includes that the company emphasized the solutions that included a combination of software, hardware and materials, instead of treating it as a separate individual element. The solution will be used in the company’s key markets: healthcare and industrial sector
Speaking of materials and software, the company has been active at that front both at the time of announcement and now. For example, its Geomagic Design X 3D software solution is considered the most versatile solution for reverse-engineering in the industry.
3D Systems plans to focus on dental solutions and medical devices, as well as surgical planning within the healthcare sector. Speaking of the industrial sector, aerospace, automotive and defense industries will be mainly targeted.
Graves stressed that combining hardware, software and material science into a single service is an approach worth pursuing, claiming that it was the main reason for the company's initial success. He added that he thinks that Chuck Hull founded the company with the intention to bring all three together.
The changes that followed the announcement of the plan were immediate. The company reduced staff, did some cuts to reduce the expenses, and invested in remote work (this part of the plan was accelerated by the ongoing pandemic). The results were impressive and the company’s financial reports in 2021 showed tremendous growth. Revenue for the second quarter of 2021 increased 44.1% compared to the same period in 2020.
The next earnings report will be on 03/07/2022, it will be interesting to see what the company reports and how the market will react given the current turbulence in the stock market.
