(2) See “Presentation of Information in this Press Release” below for a description, and the Appendix for the reconciliation of non-GAAP measurements to the most closely comparable GAAP measure.
Summary Comments on Results
Commenting on first quarter results, Dr. Jeffrey Graves, President and CEO of 3D Systems said, “We are off to a solid start in 2023, and believe we are well-positioned to execute on our full-year revenue and profitability plans for this year. As expected, we saw a return to our historical seasonality performance this year, with first quarter 2023 revenues mirroring the percentage of full year performance we experienced in 2021. At a more detailed level, first quarter revenues were driven in part by continued softness in our dental orthodontic market, which we attribute to reported sluggishness in consumer discretionary spending, in combination with pre-planned customer inventory reduction efforts. We expect these effects to moderate to some extent in the second half of the year. Off-setting this weakness, our other major end-markets remained robust, driven by continued adoption of additive manufacturing in production environments in the US and Europe. These effects were seen in the medical markets, where our personalized health service and increasing focus on point-of-care solutions continues to fuel robust growth rates, in excess of 20%. Industrial markets also remained strong, including commercial rocketry and aerospace propulsion, industrial products, and consumer goods, all of which contributed to strong organic revenue growth rates of over 9%. With the broadest range of additive manufacturing technology in the industry, we continue to invest strongly in R&D to modernize our platforms while remaining committed to delivering on our efficiency and productivity efforts. This balanced approach will enable us to meet our commitment of delivering positive Adjusted EBITDA and free cash flow for the full year of 2023, while supporting the key application developments that will deliver sustained, long-term organic growth in the years ahead.”
Dr. Graves continued, “With regard to our growth initiatives, we are pleased to report exciting progress across many areas of our developing businesses, including our early success with Oqton software for dental laboratories, where adoption and renewal rates are very strong, fueled by efficiency gains that these labs are experiencing with the Oqton platform. In our industrial markets, we made public for the first time our multi-year collaboration with TE Connectivity on electrical connectors, which holds promise to be an extremely important market for our additive manufacturing technology in the years ahead. In the medical arena, our market-leading personalized healthcare solutions, which we are now moving into select point-of-care hospital environments, offered what we feel is a glimpse into the future of customized orthopedic implants, as demonstrated at Salzburg’s University Hospital in February. Finally, in the area of regenerative medicine, as the quarter ended, we were extremely pleased to see our Systemic Bio subsidiary be awarded its first contract from a major pharmaceutical company. This multi-year program will leverage our 3D printed organ-on-a-chip technology to study the effects of new drug therapies in the fight against cancer. We anticipate more contracts with additional pharmaceutical companies to follow later this year. Finally, we are harvesting the gains in efficiency that our operations in-sourcing has provided and continue to look for additional cost synergies in multiple parts of our business. In support of our commitment to generate positive Adjusted EBITDA and free cash flow, we have expanded on our restructuring efforts that we announced a couple months ago to realize even more cost benefits, as announced in a separate release today. As a result, we are increasing our full year 2023 expectation to deliver $2 million or better in Adjusted EBITDA, while maintaining the previously announced outlook for revenue, non-GAAP gross profit margin and breakeven or better free cash flow.”
Dr. Graves concluded, "While no one knows how the winds of the global economy and ongoing geopolitical unrest may blow, with our strong balance sheet, our outlook for positive Adjusted EBITDA and free cash flow performance in 2023, and exciting markets for growth available to us in the years ahead, we are confident in our game plan and more optimistic than ever about our future."
Summary of First Quarter Results
Revenue for the first quarter of 2023 decreased 8.8% to $121,236 compared to the same period last year, and revenue on a constant currency basis decreased 6.5%. The decline of revenue primarily reflects lower sales to certain dental market customers due to macroeconomic factors that are negatively impacting the demand for elective dental procedures, partially offset by continued solid product and service demand across other areas of the business. First quarter 2023 revenue from our non-dental markets increased 12.3% on a constant currency basis compared to first quarter 2022.
Healthcare Solutions revenue decreased 24.3% to $48,725 compared to the same period last year. Healthcare Solutions revenue on a constant currency basis decreased 23.4% year over year due to continued softness in our dental orthodontic market, which was down 46.2% versus the same period last year. Healthcare Solutions revenue from our non-dental markets increased 22.4% on a constant currency basis, versus the same period last year.
Industrial Solutions revenue increased 5.6% to $72,511 compared to the same period last year. Industrial Solutions, revenue on a constant currency basis increased 9.3% year over year.
Gross profit margin in the first quarter of 2023 was 38.8% compared to 40.4% in the same period last year. Non-GAAP gross profit margin was 39.0% compared to 40.6% in the same period last year. Gross profit margin decreased primarily due to input cost inflation and unfavorable product mix.
Net loss attributable to 3D Systems Corporation decreased by $2,622 to a loss of $29,421 in the first quarter of 2023 compared to the same period in the prior year. The decrease in Net loss attributable to 3D Systems Corporation primarily reflects lower total sales volume, inflationary impacts on our input costs, and continued investments in future growth partially offset by an increase in interest income earned on cash and cash equivalents resulting from increased interest rates.
Adjusted EBITDA decreased by $12,017 to a loss of $10,094 in the first quarter of 2023 compared to the same period last year. The decrease in Adjusted EBITDA primarily reflects lower total sales volume, inflationary impacts on our input costs, and continued investments in future growth.
Updating 2023 Outlook
3D Systems is raising its full-year 2023 Adjusted EBITDA financial guidance and confirming its 2023 revenue, non-GAAP gross profit margin and free cash flow financial guidance as follows:
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Full Year 2023 Guidance as of:
| ||
| February 28, 2023 | May 8, 2023 | |
| Revenue: | $545 - $575 million | $545 - $575 million |
| Non-GAAP Gross Profit Margin: | 40% - 42% | 40% - 42% |
| Adjusted EBITDA: | Break even or better | $2 million or better |
| Free Cash Flow: | Break even or better | Break even or better |
For purposes of the above guidance, free cash flow is defined as Adjusted EBITDA less changes in working capital less capital expenditures.
