3D Systems Corp. Q3 FY2024 earnings call

Key Points

• Revenue trends: Third quarter revenue was flat sequentially due to macroeconomic and geopolitical uncertainties affecting CapEx spending on new capacity, but consumable materials grew ~10% year-over-year with sustained sequential growth.
• Application development: Industrial application group revenues up 26% year-to-date. High reliability markets like energy, oil & gas, etc., are driving interest. AI investments are cascading into targeted end markets.
• Product launches: Announced PSLA 270 photopolymer printing platform, QuickCast Air for investment casting, expanded orthopedic surgical planning portfolio, multi-material single-piece jetted denture solution, and Titan Extrusion Platform.
• Financials: Non-GAAP gross margin 37.6% including inventory obsolescence reserves, normalized margin 40.2%. Operating expense $61.4 million, adjusted EBITDA negative $14.3 million. Balance sheet cash $190 million, on pace for 20% inventory reduction by year-end.

Industrial revenues were $57.9 million, down about 19% primarily due to a decline in printer sales. Healthcare revenues were $55.1 million for the quarter, growing 5% from prior year, driven by a healthy rebound in dental and personalized health care.

Guidance

• Full-year 2024 revenue expected $440M-$450M, mid to high-single-digit sequential recovery in second-half.
• Full-year gross margin 38%-40% due to short-term inventory reserve adjustments, targeting mid-40% margins long-term as volumes recover.
• Fourth quarter OpEx expected below $60 million, adjusted EBITDA expected to improve sequentially.

Risks

• Macroeconomic and geopolitical uncertainties impacting customer CapEx spending.
• Uncertainty in customer CapEx spending in the fourth quarter and inventory management by customers.

Q: Implied revenue guidance for Q4 and drivers?

A: Jim Ricchiuti asked about the implied revenue guidance for Q4. Jeffrey Graves responded that factors include inventory management by customers and uncertainty in CapEx spending, leading to a wider range and modest growth expectation.

Q: Gross margin guidance?

A: Jim Ricchiuti asked about gross margin guidance. Jeffrey Graves said there are two factors: factory absorption and mixed effects from printer sales and material inventory management, leading to modest gross margin for the quarter.

Q: Software update, Oqton progress?

A: Troy Jensen asked about software, including Oqton. Jeffrey Graves said Oqton is integrated with 3DXpert for high reliability markets, improving productivity and traceability in production.

Q: Convertible debt due in 2026?

A: Tyler Hutin asked about convertible debt due in 2026. Jeffrey Graves said it's a work in progress to manage the debt, plans to address it early.

Q: Healthcare business order patterns?

A: Jacob Stephan asked about healthcare business order patterns. Jeffrey Graves said healthcare is a steady foundation with growth in applications below the neck and trauma field.