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3D Systems (DDD) Down 16.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for 3D Systems (DDD). Shares have lost about 16.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is 3D Systems due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

3D Systems Earnings & Revenues Miss Estimates in Q2

3D Systems reported second-quarter 2022 non-GAAP loss of 7 cents per share, missing the Zacks Consensus Estimate of break-even. The bottom line compared unfavorably with the prior-year quarter’s earnings of 12 cents per share.

In the second quarter of 2022, 3D Systems reported revenues of $140 million, down 13.8% from the year-ago quarter but up 5.3% from the previous quarter. Excluding the impact of business divestments in 2022 and on a constant currency basis, revenues increased 7.8% year over year. The top line lagged the consensus mark of $149.1 million for the second consecutive quarter.

3D Systems’ second-quarter performance reflected impacts of inflationary pressure, foreign exchange risks and supply chain disruptions, among other ongoing macroeconomic constraints.

Quarter in Detail

In the second quarter, product revenues represented 74% of the total revenues and decreased 4.5% to $103.8 million. Revenues from Services, which accounted for 25.9% of revenues, plunged 32.7% year over year to $36.3 million.

Revenues from the Healthcare segment fell 13.4% year over year to $71.7 million. The figure increased 11.5% from the prior quarter. Excluding the impact of business divestments, the segment’s revenues increased 4.7% year over year.

The industrial division revenues decreased 14.3% year over year to $68.3 million and 0.6% sequentially. Excluding the impact of business divestments, the unit’s revenues increased 11.2%. The company witnessed solid demand for products as well as materials.

Operating Details

During the second quarter of 2022, 3D Systems’ non-GAAP gross profit decreased 5.2% year over year to $53.3 million. Consequently, non-GAAP gross profit margin contracted 330 basis points (bps) to 38.1%. This decrease was driven by year-over-year product mix changes due to divestitures and increased supply chain disruptions.

Non-GAAP operating expenses increased 24.5% to $60.9 million. The increase was due to spending related to future growth, which includes expenses from acquisitions, research and development, and corporate infrastructure.

Non-GAAP operating loss was $7.6 million versus the year-ago operating income of $7.3 million.

Adjusted EBITDA was negative $2.6 million. The margin of negative 1.9% reflected the inflationary impact on input costs and gradual investments for portfolio & business growth.

Balance Sheet Details

The company exited the second quarter with cash, cash equivalents and short-term investments of $638.2 million, lower than the prior quarter's $745.6 million. As of Jun 30, 2022, 3D Systems had a total debt of $448.1 million, slightly up from the previous quarter’s $447.5 million.

In the first six months of 2022, the company utilized $38.2 million of cash from operational activities.

Guidance

3D Systems once again trimmed its full-year 2022 guidance. The company now expects revenues between $530 million and $570 million, compared with the previously expected band of $580 million to $625 million. It now projects non-GAAP gross margin to be 39-41% rather than the previously estimated 40-43%.

Non-GAAP operating expense is estimated to be $245-$250 million, raising the lower end from the earlier projection of $235-$250 million.

Management provided this guidance with the assumption that the pandemic, supply chain disruptions or any geopolitical events will not be of any concern in 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -67.57% due to these changes.

VGM Scores

Currently, 3D Systems has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 3D Systems has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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