Third Quarter Financial and Operational Results
Q3 2020 GAAP revenue of $135.1 million, compared to $155.3 million in Q3 2019 and $112.1 million in Q2 2020
Q3 2020 GAAP loss of $0.61 per share compared to a loss of $0.15 per share in Q3 2019; Included in the third quarter 2020 net loss was a $48.3 million ($0.41 per share) pre-tax non-cash goodwill impairment charge
Q3 2020 Non-GAAP loss of $0.03 per share compared to a loss of $0.04 per share in Q3 2019 and a loss of $0.13 per share in Q2 2020
Q3 2020 Non-GAAP operating income was break-even
$25 million of equity was issued in Q3 2020 under the company's at-the-market equity program; none is expected to be issued in Q4 2020
Summary Comments on Third Quarter Results
Commenting on the quarter, CEO, Dr. Jeffrey Graves, said, “While the challenges of the pandemic persist, we were pleased to deliver strong sequential quarterly growth in both our Healthcare and Industrial businesses of approximately 20%, as markets incrementally opened around the world. While volatility continues, we anticipate these trends continuing as we move forward through our fourth quarter. With our restructuring efforts on track to deliver our targeted $60 million in savings on a run-rate basis by year end, we are pleased with our progress in the quarter and believe we will exit the year a much more efficient, highly focused additive manufacturing company that is well positioned as a market leader in this exciting industry.”
Dr. Graves continued, “From a balance sheet perspective, we have made substantial progress in our divestiture of non-core assets, and, earlier this week, were pleased to announce an agreement on the sale of our Cimatron and GibbsCAM software businesses, the focus of which is subtractive manufacturing technology. This sale, which we expect will close in the coming weeks, will strengthen our balance sheet and help ensure our ability to execute our planned restructuring activities, while maintaining critical investments for growth in our core businesses. We continue to pursue further divestitures of non-core assets to occur in the months ahead.”
Summary of Third Quarter Results
Revenue for the third quarter of 2020 decreased 13.0% compared to the same period last year and increased 20.6% compared to the second quarter of 2020. The results reflect a rebound in customer activity from the worst of the pandemic-related shutdowns. Revenue from Healthcare increased 6.1% to $59.8 million, compared to the same period last year, driven by stronger sales to the dental market. Industrial sales decreased 23.8% to $75.3 million, compared to the same period last year, as decreases were in all products, materials and services across all geographies.
Gross profit margin in the third quarter of 2020 was 43.4% compared to 43.3% in the same period last year. Non-GAAP gross profit margin was 43.5% compared to 44.4% in the same period last year. Products gross profit margin decreased primarily due to the under absorption of supply chain overhead, resulting from lower production, while services gross profit margin improved.
Operating expenses increased 59.4% to $126.2 million in the third quarter of 2020, compared to the same period a year ago. On a non-GAAP basis, operating expenses were $58.8 million, a 15.2% decrease from the third 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.
Included in operating expenses is a $48.3 million pre-tax non-cash goodwill impairment charge. The goodwill impairment was identified in connection with an interim goodwill impairment test. The interim test was necessitated by our identification of certain impairment triggering events associated with the decline of the company’s share price ultimately due to the impact on the business environment from the COVID-19 pandemic. The impairment charge will not result in any cash expenditures and will not affect the company’s cash position, liquidity, availability or covenant test under its senior secured term loan facility and its senior secured revolving credit facility.
Financial Liquidity
At September 30, 2020, the company had cash on hand of $75.3 million, total debt of $21.7 million and a $100 million unused revolving credit facility with approximately $30.6 million of availability based on the terms of the agreement. Cash on hand has decreased $58.4 million since December 31, 2019. The uses of cash included $26.5 million for repayments of debt, $32.6 million for operations, $12.5 million for payments to purchase noncontrolling interests and $11.0 million for capital expenditures, partially offset by proceeds of $25.0 million from the issuance of common stock.
Under its at-the-market equity program (“ATM Program”), the company issued $25 million of common stock during the third quarter and has a further $125 million available. However, given the company's improving performance, the anticipated completion of the sale of the Cimatron and GibbsCAM businesses and receipt of proceeds from the sale, 3D Systems does not expect to issue shares of its common stock as part of its ATM Program during the fourth quarter of 2020. Following completion of the sale of the Cimatron and GibbsCAM businesses, 3D Systems plans to evaluate the continued need for the ATM Program and may ultimately elect to terminate such program.
