Summary Comments
Commenting on the company’s progress in 2020, Dr. Graves said, “With our singular focus on additive manufacturing, we were pleased to deliver strong growth at the end of what was an unprecedented year. The execution of our four-stage plan to deliver increased value to our customers and shareholders, initiated in the summer of 2020, took hold and rapidly gained momentum as we moved through the second half of the year. By the fourth quarter, the results of these efforts in our two focused businesses became very clear. Our Healthcare business delivered exceptional revenue growth of 48% year-over-year, driven strongly by both dental and medical applications, while also making a significant technological breakthrough in our emerging regenerative medicine area, which will be increasingly important to our Healthcare business in the years ahead. We were also very pleased with our Industrial performance during the fourth quarter, which recorded double-digit revenue growth on a consecutive quarter basis, continuing the recovery we have seen in our markets from the effects of the COVID-19 pandemic. Our Industrial business growth reflected broad-based wins, particularly in the metals application areas, pointing to increasing demand for our products in markets like aerospace, automotive, and consumer products.
Dr. Graves continued, “Executing on our plan to drive increased efficiencies, we achieved our target of $60M in run-rate cost savings by the end of 2020. In addition, our divestiture efforts for non-core assets have been an important step in our plans to refocus on our core mission to be the leader in enabling additive manufacturing solutions for applications in growing markets that demand high-reliability products. With proceeds from our initial divestitures and positive cash flow, we will continue to look for opportunities to invest in the business, as evidenced by our recent announcement regarding our expanding regenerative medicine program.”
Dr. Graves summarized, “While 2020 will always be known as a year of great challenges, I am very proud of our efforts to focus the business on the increasingly exciting opportunities we see ahead for additive manufacturing, across both Healthcare and Industrial markets. With the progress we have made over the last year, we can now clearly see a future of exciting growth, expanding applications, and increasing profitability that will allow us to invest for the future, creating true value for our customers, our employees and our shareholders.”
Summary of Fourth Quarter Results (unaudited)
Revenue for the fourth quarter of 2020 increased 2.6% compared to the same period last year and increased 26.8% compared to the third quarter of 2020. The results reflect a continuing rebound in customer activity from the worst of the pandemic-related shutdowns as well as an increasing number of new applications for additive manufacturing technology. Revenue from Healthcare increased 48.0% to $86.6 million, compared to the same period last year, driven by strong sales in both dental applications and medical applications. Industrial sales decreased 21.6% to $86.0 million, compared to the same period last year, as demand, while strengthening, has not yet returned to pre-pandemic levels. Compared to the third quarter of 2020, Healthcare increased 42.4% and Industrial increased 14.2% in the fourth quarter of 2020.
Gross profit margin in the fourth quarter of 2020 was 42.0% compared to 44.1% in the same period last year. Non-GAAP gross profit margin was 42.9% compared to 44.3% in the same period last year.
Operating expenses decreased 9.2% to $71.7 million in the fourth quarter of 2020, compared to the same period a year ago. On a non-GAAP basis, operating expenses were $58.0 million, a 15.8% decrease from the fourth quarter of the prior year. The lower non-GAAP operating expenses reflect savings achieved from cost restructuring activities as well as reduced hiring and lower travel expenses resulting from the coronavirus pandemic.
Summary of Full-Year 2020 Results (unaudited)
Revenue for the full year 2020 decreased 12.4% compared to the prior year, primarily due to the impacts of COVID-19, the effects of which occurred most severely at the onset of the pandemic with a strong return in activity in the latter half of the year. Revenue from Healthcare increased 9.1% to $245.4 million compared to the prior year, driven by stronger sales in both dental and medical applications. Industrial sales decreased 24.2% to $311.9 million compared to the prior year, as demand has not yet returned to pre-pandemic levels.
Gross profit margin for the full year 2020 was 40.1% compared to 44.1% in the prior year. Non-GAAP gross profit margin was 42.6% compared to 44.8% in the prior year. Gross profit margin decreased primarily due to the under absorption of supply chain overhead resulting from lower production, as well as an end-of-life inventory charge of $12.4 million.
Operating expenses for the full year 2020 increased 1.4% to $342.3 million compared to the prior year. On a non-GAAP basis, operating expenses were $236.9 million, a 16.2% decrease from the prior year. The lower non-GAAP operating expenses reflect savings achieved from cost restructuring activities as well as reduced hiring and lower travel expenses resulting from the coronavirus pandemic.
2021 Gross Profit Margin Outlook
On a non-GAAP basis, the company expects 2021 gross profit margins to be between 40% and 44%, taking into account businesses divested in 2020 and early 2021, as well as the impact of the company’s cost savings initiatives.
Financial Liquidity
At December 31, 2020, the company had cash on hand of $84.7 million, including cash in assets held for sale and restricted cash, total debt of $21.4 million and a $100 million unused revolving credit facility with approximately $62.0 million of availability based on the terms of the agreement. During the fourth quarter of 2020, the company did not issue any shares under its at-the-market equity program (“ATM Program”), which, as previously disclosed, has now been terminated.
The company closed on previously announced divestitures and used proceeds to eliminate outstanding debt, leaving its balance sheet in a net-cash position. The strengthened balance sheet and improved cost structure positions the company well to support future growth investments.
Preliminary Audit Results
In the course of preparing its financial results for the fourth quarter and full year 2020, the company discovered certain internal control deficiencies. As a result, the company will report material weaknesses in internal controls in its fiscal 2020 Annual Report on Form 10-K. As of the date of this release, there have been no material misstatements identified in prior year financial statements as a result of these deficiencies, and the company expects to file its 2020 Annual Report on Form 10-K no later than March 16, 2021. Please refer to the upcoming 2020 Annual Report on Form 10-K for more information.
The unaudited financial data above remains subject to audit, review or other procedures by the company’s independent registered public accounting firm. As a result, actual results may differ from the anticipated results shown above.
Q4 and FY 2020 Conference Call and Webcast
The company will host a conference call and simultaneous webcast to discuss these results tomorrow morning, which may be accessed as follows:
Date: Tuesday, March 2, 2021
Time: 8:30 a.m. Eastern Time
Listen via webcast: www.3dsystems.com/investor
Participate via telephone: 201-689-8345
A replay of the webcast will be available approximately two hours after the live presentation at www.3dsystems.com/investor.
Forward-Looking Statements
Certain statements made in this release that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In many cases, forward looking statements can be identified by terms such as “believes,” “belief,” “expects,” “may,” “will,” “estimates,” “intends,” “anticipates” or “plans” or the negative of these terms or other comparable terminology. Forward-looking statements are based upon management’s beliefs, assumptions and current expectations and may include comments as to the company’s beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors described under the headings “Forward-Looking Statements” and “Risk Factors” in the company’s periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements. Although management believes that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at which such performance or results will be achieved. The forward-looking statements included are made only as the date of the statement. 3D Systems undertakes no obligation to update or revise any forward-looking statements made by management or on its behalf, whether as a result of future developments, subsequent events or circumstances or otherwise.
