2 key elements of 3D Systems results that investors should know
Eearlier this month, 3d systems (NYSE: DDD) released first quarter 2021 results that easily exceed Wall Street consensus estimates for revenue and earnings. The stock soared 35% the next day.
In the first quarter, the 3D printing company’s revenue grew 7.7% year-over-year (and 17% excluding the impact of divestments) to $ 146.1 million. Growth has been driven by the continued strength of the healthcare segment and a stabilization of the industrial segment, which has been hit hard by the fallout from the COVID-19 pandemic.
In addition, the company generated a profit both on an adjusted basis and in accordance with generally accepted accounting principles (GAAP). Adjusted for one-time items, net income was $ 20.9 million, or $ 0.17 per share, up from loss per share of $ 4.5 million, or 0.04 dollar per share, during the same period of the previous year. GAAP net income was $ 45.2 million, or $ 0.36 per share, compared with a loss of $ 18.9 million, or $ 0.17 per share, in the first quarter of 2020.
Revenue releases only tell part of the story. Here are two key things from 3D Systems’ first quarter earnings call that investors should know.
Image source: Getty Images.
1. The company’s competitive advantages
Comments from CEO Jeffrey Graves:
There are three things that inspire my confidence in our future. And I think they should inspire yours as well. First, we have by far the broadest technology portfolio in the industry. […] Second, I have no doubts that we have the brightest and most creative application engineers in the industry. […]
Third, as one of the largest and most experienced companies in the industry, we have the size and infrastructure to not only meet the needs of our customers during the initial implementation of additive manufacturing, but also to support them throughout the life of their equipment by providing them with keys. services and consumables essential to their continued business success.
Regarding Graves’ first point, 3D Systems has the broadest offerings in the 3D printing industry in terms of technology to my knowledge, at least among publicly traded companies. It has several polymer technologies and at least one metal 3D printing technology.
For a few points of comparison: Rival Stratasys (NASDAQ: SSYS), another well-established pure-play 3D printing company, does not have metal 3D printing technology. Newly public Office metal (NYSE: DM) It is still in its infancy in commercializing its metallic technology and has only recently expanded into polymers through its acquisition of EnvisionTEC in February.
His second point about having “the brightest, most creative application engineers” is too subjective to address.
I also agree with Graves’ third point about 3D systems having an advantage in scale and experience, at least over most other players. Having said that, there is a caveat here. Under the previous two CEOs, the company prematurely released products that had quality issues. So, while the scale typically offers various benefits, it won’t if customers are reluctant to buy a product from a company due to quality issues. Hopefully this problem is largely behind 3D Systems, but investors have yet to watch it.
2. Develop your healthcare business organically and through acquisitions
From Graves’ remarks:
As you can see from our numbers for the first quarter, we are seeing a growing demand for new applications, especially in our healthcare industry. To meet this demand forecast, we are expanding our location in Denver, Colorado by approximately 50%. […] Thanks to this next phase of investment […] We will be able to reduce time-to-market for new medical applications, continue to expand our product offering and better meet the overall needs of our growing healthcare customer base.
In the first quarter, 3D Systems healthcare revenue jumped 39% year-over-year to $ 72.5 million. This sector accounted for 49.6% of the company’s total sales, or $ 146.1 million. Thus, its activity is now essentially divided between health care and industrial.
As Graves said in the previous quarter’s call, the company’s healthcare business “brings a little higher gross margin on average than our industrial business.” So naturally it makes a lot of sense to focus a bit more on the most profitable applications.
In addition, 3D Systems announced several days before releasing its first quarter results from the acquisition of Allevi, a small Philadelphia-based bioprinting company. Bioprinting refers to the use of 3D printing technology to print animal and human cells to produce functional three-dimensional tissues. It was a smart move and widens the company’s involvement in this space, as it collaborates with United Therapeutics (NASDAQ: UTHR) in this field since 2017.
Graves said a key medium-term application of bioprinting is to help pharmaceutical companies speed up the drug development process. A longer term goal of those working in this space is to print fully functional solid human organs such as the liver, heart, and kidneys for transplantation. Regenerative medicine, as it is often called, is still in its infancy, but it has enormous potential for growth.
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