Shares of 3D Systems (DDD -23.14%) were down 0.8% in Tuesday's after-hours trading session, following the 3D printing company's release of its third-quarter results.

The quarter's revenue missed the analyst consensus estimate, while adjusted earnings exceeded it. In addition, management tightened its full-year revenue guidance range, which had the effect of lowering the midpoint. It maintained its prior outlook for adjusted gross margin. 

The stock's muted reaction in after-hours trading on Tuesday makes sense, given the mixed quarterly report and relatively minor tweaks to 2022 guidance. Its performance on Wednesday will not only be influenced by the earnings report but also by market dynamics and information that management shares on the analyst earnings call. This call is scheduled for Wednesday at 8:30 a.m. ET. 

3D Systems' key metrics

Metric Q3 2021 Q3 2022 Change YOY
Revenue $156.1 million $132.3 million (15%)
GAAP operating income ($17.2 million) ($33.7 million) Loss widened 96% 
GAAP net income $292.7 million ($37.4 million)

Flipped to negative from positive

Adjusted net income $6.5 million ($6.3 million) Flipped to negative from positive
GAAP earnings per share (EPS) $2.34  ($0.30) Flipped to negative from positive
Adjusted EPS $0.05 ($0.05) Flipped to negative from positive

Data source: 3D Systems. GAAP = generally accepted accounting principles. YOY = year over year.

Investors should focus on the adjusted metrics, as they enable apples-to-apples comparisons. In the year-ago period, the company's GAAP net income and EPS were positive only because it had a big gain from the sale of noncore assets. 

Revenue grew 2.7% year over year, excluding the impacts of divestitures of noncore assets made over the last year and foreign exchanges. In the second quarter, this metric was 7.8%, so it declined sequentially.

Wall Street was looking for revenue of $136.1 million and adjusted loss per share of $0.07. So the company fell short of expectations on the top line but beat them on the bottom line.

The quarter's gross margin was 39.8%, down from 41.2% in the year-ago period. The decline was primarily due to input cost inflation, divestitures, and product mix. Given how much inflation has surged over the last year, gross margin held up fairly well.

In the first nine months of the year, 3D Systems used cash of $52.4 million running its operations. It ended the period with cash and short-term investments of $609.4 million and long-term debt of $448.9 million.

Segment results

Segment Q3 2022 Revenue Change, YOY Change, Excluding Divestitures and Currency Impacts YOY
Industrial $68.1 million (15%) 9%
Healthcare $64.2 million (16%) (3.5%)
Total $132.3 million (15%) 2.7%

Data source: 3D Systems. YOY = year over year.

The company experienced what it termed "solid" overall demand in both its industrial and healthcare segments. However, revenue growth was hurt by continued supply chain issues and weakness in the dental portion of its healthcare segment. The challenging macroeconomic environment has dampened demand for elective dental procedures.

What the CEO had to say

Here's part of CEO Jeffrey Graves' (lengthy) statement in the earnings release:

We are seeing steady demand for our industry-leading suite of additive manufacturing solutions in core end markets, such as energy, commercial space, precision micro-castings, and medical devices. However, as we had expected, the difficult global macroeconomic and geopolitical environment has put pressure on consumer discretionary spending, which led to significantly lower sales to key dental market customers during the quarter.

[R]ecent actions we have taken to control operating costs and to streamline our manufacturing and inventory management processes had a positive impact on the company's profitability metrics during the third quarter.

2022 guidance revised

Management tightened the range of its prior 2022 revenue guidance, which resulted in a $10 million reduction at the midpoint. It maintained its prior adjusted gross margin outlook by slightly lowering its planned operating expenses.

Metric 2021 Result Prior 2022 Guidance Current 2022 Guidance Annual Change Implied by Current Guidance*
Revenue $615.6 million $530 million to $570 million ($550 million midpoint) $535 million to $545 million ($540 million midpoint) (13%) to (11%)
Adjusted gross margin 43% 39% to 41% 39% to 41% Decline of 3 percentage points to flat
Adjusted operating expenses $214.7 million $245 million to $250 million $240 million to $245 million

12% to 14% increase in expenses

Data source: 3D Systems. *Calculations by author.

No notable surprises

Certainly, 3D Systems' Q3 report wasn't the kind of quarterly report investors want to see, but it wasn't a bad one in light of the uncertainty and challenges in the macro environment.

The report didn't have any notable surprises. While the quarter's revenue missed Wall Street's estimate and its bottom line surpassed the estimate, neither result was that far off. Moreover, the tweaks to full-year guidance weren't that significant.