At a Glance
- Multiple major mergers and acquisitions in the 3D printing space have led to a drop in industrial/professional printer shipments, but demand from the industrial sector remains strong.
- 3D scanners keep breaking one record after another, with continuing demand keeping the sector on a steady upward trajectory.
- In desktop manufacturing, Stratasys has turned down Nano Dimension’s merger offer, and the latter is now facing potential internal issues.
- Moving into Q3, we’re seeing ongoing demand across the board, although some companies are still committed to cost-cutting measures.
Market Overview
In Q1 2023, we saw a surprise bid to acquire one of the leading players in the 3D printing segment. Last quarter’s surprise, however, turned into Q2’s defining feature.
The 3D printing segment saw both accepted acquisitions and propositions for potential future ones fly back and forth between the sector’s largest companies. Depending on how things play out, we may soon see the establishment of the first $1B 3D printing company. That’s certainly something to look forward to.
Elsewhere, it seems there’s no stopping the success of 3D scanners. But can the sector continue breaking its own records for a fifth consecutive quarter?
Here are my insights of the Q2 2023 in the additive manufacturing market, and my thoughts on what the future may hold.
* While the market report provides valuable insights, it’s important to note that it might not include the latest developments, such as updates from Stratasys, 3D Systems, and the recent mergers involving Desktop Metal.
3D Printing Market
In Q1, both 3D Systems and Desktop Metal said they would reduce their workforce, and I suspected that we would see companies follow the trend in Q2. In cases like these, I don’t necessarily enjoy it when I end up being right.
For example, 3D printing service provider Xometry slashed its workforce by 4%, in addition to the 6% announced in Q1. That’s despite the respectable profit growth the company saw (more on that in a minute). Although this technically falls into Q3, we also already know that Essentium is also cutting jobs.
Besides cost reductions, Q2’s defining feature was the race to become the first $1B 3D printing company. That race seemingly ended in May, when Stratasys and Desktop Metal announced their intention to merge in a $1.8B (£1,4B) all-stock transaction, expected to close in Q4 2023.
The companies estimate the new combined unit would generate $1.1B (£862M) in revenue by 2025. Race won? We’ll see.
Yet, 3D Systems doesn’t want to be outdone, and the company announced an unsolicited bid to acquire Stratasys in early June. With this, 3D Systems joins Nano Dimension in attempting to buy Stratasys (again, more on that later). For its part, Stratasys has said it would “engage in discussions” with 3D Systems, but we’ll have to wait until Q3 wraps up to see how that plays out.
3D Systems also acquired Swedish SLS printer manufacturer Wematter in early May. Consolidation in the marketplace appears to be the name of the game.
Three of the biggest additive manufacturing players in the market attempting to acquire each other has — perhaps understandably — resulted in some uncertainty among buyers. Shipments of industrial and professional-grade 3D printers fell in Q1 due to the M&A rumours, and this downward trend seems may continue into the future.
On the brighter side of the coin, however, shipments of consumer and hobbyist-level printers are rising.
Yet, the falling shipments don’t seem to have affected the market players all that drastically. On the less positive end of the scale, 3D Systems reported its revenues decreased 8.5% y-o-y and 8.6% year-to-date due to weakness in the dental orthodontics market (just as in Q1). Disregarding that poorly performing sector, though, the company’s revenue was actually up 3% y-o-y.
Desktop Metal did well, reporting its best quarter of adjusted EBITDA since the company went public. Revenue was up 29% — not too shabby.
What about Stratasys? The company did report an operating loss due to M&A activity and defending against hostile tender offers. Still, Stratasys revenue was up 1.6% y-o-y, with the highest-ever recurring revenues in Consumables and Customer Service.
Markforged also saw a 5% revenue rise y-o-y in Q2 2023, although gross profit was somewhat down. Velo3D, meanwhile, reported record new customer demand, alongside a 28% increase in revenue y-o-y.
The 3D printing services and software segments were largely responsible for keeping the 3D printing market growing in Q1. Moving into Q2, however, we’re seeing some players in these segments possibly losing steam.
Printing service provider Protolabs reported a 3.7% drop in total revenue y-o-y, but that’s not the whole story. Revenue from the Hubs digital printing network increased a whopping 79% y-o-y and 17.6% compared to Q1 2023.
The aforementioned Xometry also saw a 16% uptick y-o-y in both revenue and gross profit. Perhaps there is still demand for printing services and the issues lie elsewhere.
In the software segment, things are looking bright. Dassault Systèmes (which owns SOLIDWORKS) reported an 8% increase in both total and software revenue. Materialise, for its part, saw a 3.6% revenue increase in the software segment, 8.5% in manufacturing, and 11.6% total, all y-o-y.
In other developments, Formlabs released two new materials for dental and medical applications — the Dental LT Comfort Resin and the BioMed Durable Resin. BCN3D introduced the Omega I60, a new high-speed industrial FFF 3D printer aimed at producing large-scale tooling, jigs, and fixtures.
Q2 also demonstrated advancements in construction 3D printing. The world’s largest 3D-printed building — a luxury horse barn — was completed in June in Tallahassee, Florida.
For the time being, the 3D printing segment is muddled as we wait for the end results of the various acquisitions. Yet, despite inflationary pressure, demand for additive solutions remains strong in most industrial segments. Even in the weak dental sector, the lagging performance is not the machines’ fault — consumers simply have less money to put into elective dental procedures.
3D Scanning Market
In my previous market update, I said only a massive global financial upheaval could stop the 3D scanning segment from reaching ever greater heights. Well, such an upheaval hasn’t materialised, and the sector is doing as brilliantly as ever.
Take, for instance, Ametek, which own the Peel 3D and Creaform lines of 3D scanners. The company has been reporting a record quarter after another since Q3 2022. This one has been no exception.
In Q2, Ametek registered $1.65B (£1.29B) in sales, breaking its previous record once again. The sales were up 9% y-o-y in total.
The Electronic Instruments Group (EIG), which covers 3D scanners, was responsible for $1.13B (£885M) of those sales. This segment saw a 10% increase in sales and a 16% increase in operating income y-o-y.
“EIG delivered another exceptional quarter. Strong and broad-based sales growth was supported by solid demand across our diverse end markets and the success of our organic growth initiatives,” said Ametek CEO and chairman David A. Zapico.
I feel like I’m repeating myself here, but those are the results. The feeling of déjà vu only gets stronger when we look at Hexagon, the owner of Leica 3D scanners.
Just like in Q1 2023 and Q4 2022 before that, Hexagon reported organic revenue growth of 8%. If that doesn’t demonstrate steady growth, I don’t know what does. The company also saw 6% growth in operating net sales.
Hexagon’s industrial enterprise solutions segment (which includes 3D scanners) followed the precedent set in the previous quarters by outperforming the company as a whole. This sector matched the 11% increase in sales y-o-y that we saw in Q1. Earnings grew 8% y-o-y, which was admittedly below the 14% reported in Q1.
“I am very pleased to report a strong Q2 performance, and especially 8% organic growth, driven by the continued adoption of our innovative solutions … Hexagon’s operating margin remained resilient at 28.9%, despite a significant negative impact on EBIT from currency,” said Hexagon President and CEO Paolo Guglielmini.
Can 3D scanners be stopped in Q3? Probably not. We may not necessarily break new records in the coming quarter, but there doesn’t seem to be any reason to expect demand to fall drastically.
Desktop Manufacturing Market
The desktop manufacturing segment saw unexpected drama in Q1, when PCB 3D printer manufacturer Nano Dimension suddenly submitted a bid to acquire Stratasys, as I mentioned. However, that deal seems to be dead in the water.
Stratasys’ board of directors has repeatedly and unanimously rejected one revised offer Nano Dimension has made after another. Unless something drastic happens in Q3, I would not hesitate to say we will not see a merger between Stratasys and Nano Dimension.
Perhaps that’s welcome for Nano Dimension, as the company seems to be wrangling with some internal issues. Nano Dimension chairman and CEO Yoav Stern has said Murchinson Ltd., one of the company’s shareholders, is engaging in stock manipulation and other methods to reap short-term profits with little regard for long-term viability.
At least Nano Dimension is doing well for itself otherwise. The company reported a 33% increase in revenue y-o-y in Q2 2023, and a 32% increase in gross margin.
“Nano Dimension’s momentum continues, and the second quarter and first half of 2023 are no exception. When many, if not all other businesses, in our space have top-lines that are stagnating or declining, our revenues are growing 33% quarter-over-quarter and 38% half-over-half for 2023,” Mr. Stern said.
Elsewhere, the desktop manufacturing segment appears to continue much along the same lines as before. It’s not like the companies are sitting idly by, though. Just as an example, Mayku launched three new engineering materials (ABS, PMMA, and UHMW) for its Multiplier desktop pressure forming machine in Q2.
Although precise predictions are challenging to make, since many of the players in the market are small and privately owned, we can expect technological advancements — including automation features and the rise of hybrid 3D printer/CNC machines — to spur growth in the sector.
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