3D Systems Reorganizes, Retrenches

3D Systems has announced significant budget and staffing cuts as part of a wide-reaching effort to reorganize and restructure. The company made the announcement on Wednesday as it released disappointing Q2 financial results.

The company's revenue for the second quarter of 2020 was down 28.7% compared to the same period in 2019, and fell 16.8% compared to the first quarter of this year. According to the announcement: "The lower demand was across all products and services due primarily to the COVID-19 pandemic, as many customers were shutdown or on a significantly reduced level of activity. Revenue from Healthcare decreased 11.4% to $50.0 million, compared to the same period last year, driven by the decrease in the dental market. Industrial sales decreased 38.5% to $62.1 million, compared to the same period last year, as decreases were in all products, materials and services across all geographies."

"Our results in the second quarter reflect continued impact from the COVID-19 pandemic; however, the pandemic has also demonstrated a clear role for flexible supply chain enabled by additive manufacturing, particularly in the medical field, which speaks to our unique capabilities as a provider of hardware, software, materials and services to drive application-specific solutions," said Jeffrey Graves, president and CEO. Graves joined the company in May.

The company plans to focus its sales efforts on the healthcare and industrial markets. 

“We will focus on markets and applications where a premium is placed upon performance and reliability; with engineering/technology cultures that seek product innovation as a means of delivering value to their customers; and with processes that tend to be highly controlled," Graves said. "Thanks to our unique offering of hardware, software, materials and services, combined with our leadership in application knowledge, we believe we are best-positioned to provide additive manufacturing solutions for specific, high-value applications in growing markets like healthcare, aerospace and defense. We have a demonstrated capability to be successful in these markets, with our technologies and process knowledge today enabling up to half-million production parts to be made through additive manufacturing each day.”

As part of the resizing effort, the company plans to reduce annualized costs by approximately $100 million by the end of next year. That includes a 20% workforce reduction that will be completed by the end of 2020.

Other cost reduction efforts include reducing the number of facilities and "examining every aspect of the company’s manufacturing and operating costs." The company is also evaluating the divesture of parts of the business that do not align with its strategic focus.

In order to increase the company's liquidity and flexibility, the Board of Directors has also approved an at-the-market equity program (“ATM Program”) that allows 3D Systems to issue up to a total of $150 million of shares of the company’s common stock to the public, at the company’s discretion. 

As of June 30, 2020, the company had cash on hand of $63.9 million, total debt of $21.5 million and a $100 million unused revolving credit facility with approximately $24 million of availability based on the terms of the agreement. Cash on hand decreased $69.7 million since December 31, 2019.  

In June, competitor Stratasys announced a similar restructuring, including a 10% workforce reduction and a $30 million reduction in operating expenses.

Sources: Press materials received from the company and additional information gleaned from the company’s website.