Valuations for the publicly traded companies went on a wild ride over the last twelve months. For example, shares of 3D SYSTEMS began 2020 at $9, dropped to a low of $5 midyear, reached $57 in February 2021, and recently were trading in the mid-$20 range. Shares of STRATASYS and other AM companies followed a similar pattern. The reason for the initial decline in stock prices was of course obvious—the global pandemic. The major reasons for the initial recovery in the prices of AM stocks were likely the same reasons stocks in general began to recover. We believe the key reasons included expectations for economic recovery, optimism regarding a vaccine, accommodative monetary policy, and fiscal stimulus. Further expansion in the valuations of AM companies was, in our view, driven by expectations that AM would play an expanded role in the post-pandemic economy—offering companies and governments supply chain security and manufacturing flexibility in the case of a future similar event. More recently, valuation multiples have contracted materially from the highs in early 2021.
Although DESKTOP METAL joined the ranks of public companies at the end of 2020, 3D SYSTEMS and STRATASYS continued to account for the majority of the market capitalization of AM companies throughout most of the year. 3D SYSTEMS’ revenue declined 12% in 2020. STRATASYS reported an 18% decline. 3D SYSTEMS benefited from proportionally greater healthcare exposure, and specifically demand associated with the manufacture of dental aligners.
The midpoint of STRATASYS management’s revenue guidance range at the outset of 2020 indicated the company expected revenue growth of about 2% for the full year. 3D SYSTEMS management did not provide a revenue forecast at the beginning of 2020. The pandemic, of course, weighed on both companies’ financial results during the year, particularly in the first half. STRATASYS reported a first-quarter revenue decline of 14% year-over-year, which included a 40% year-over-year drop in printer revenue. In second quarter 2020, STRATASYS revenue was down 28%, including a 36% decline in printer revenue. In first quarter 2020, 3D SYSTEMS reported an 11% year-over-year revenue decline, including a 35% drop in printer sales. In second quarter 2020, 3D SYSTEMS’ revenue was down 29%, including a 38% decline in revenue associated with printers and other products. Materials sales at 3D SYSTEMS were down about 30% in the second quarter. Most private AM companies suffered similar near-term declines, particularly at the onset of the pandemic, driven by customer shutdowns and broad declines in capital spending across most industries.
3D SYSTEMS’ 12% organic revenue decline in 2020 follows a series of largely disappointing revenue results in recent years. On an organic basis, revenue was down 7% in 2019, up 5% in 2018 (supported by the dental aligner industry), and relatively flat in 2017. Organic revenue declined 5% in both 2016 and 2015. The company’s revenue growth rate has decelerated substantially since reporting organic growth of 25% in 2012, 30% in 2013, and 14% in 2014. STRATASYS has experienced a similar slowdown, with the organic revenue decline of 18% in 2020 following declines of 2% in 2019, 1% in both 2018 and 2017, 3% in 2016, and 10% in 2015. The company experienced organic revenue growth of 27% in 2012, 25% in 2013, and 32% in 2014.
Slower growth in recent years likely contributed to management changes at both companies. 3D SYSTEMS’ long-time CEO Avi Reichental left the company in October 2015 and was replaced in April 2016 by HP veteran Vyomesh “VJ” Joshi. In February 2020, 3D SYSTEMS announced that Joshi planned to retire. Dr. Jeff Graves took over the role of president and CEO of 3D Systems in May 2020. STRATASYS’ former CEO David Reis retired in June 2016 and was succeeded by board member Ilan Levin. Levin stepped down in June 2018 and Chairman of the Board Elan Jaglom subsequently assumed the role of interim CEO while the company searched for a permanent CEO. Yoav Zeif officially assumed the CEO role at STRATASYS in February 2020.
The growth characteristics, market opportunities, and disruptive potential of AM companies, coupled with ongoing media coverage, continue to attract the attention of investors. STRATASYS, 3D SYSTEMS, and DESKTOP METAL (which went public in December 2020) are the largest publicly traded AM companies in the United States. Stratasys trades on the NASDAQ exchange under the ticker symbol SSYS. 3D SYSTEMS and DESKTOP METAL trade on the New York Stock Exchange (NYSE) under the ticker symbols DDD and DM, respectively. Other publicly traded AM companies on the NASDAQ include EXONE (XONE), MATERIALISE (MTLS), NANO DIMENSION (NNDM), and VOXELJET (VJET). SLM SOLUTIONS (AM3D) trades on the Xetra platform in Frankfurt, Germany.
Although NANO DIMENSION generated revenue of only $3.5 million in 2020 (down 52% from 2019), the company now has a market capitalization of almost $2 billion following 11 stock offerings within a twelve month period that collectively added over $1.5 billion cash to the company’s balance sheet. Since inception, NANO DIMENSION has sold about 60 printers used primarily for the fabrication of circuit boards.
PROTO LABS (PRLB) is a provider of low-volume custom parts, made primarily with injection molding and CNC machining. The company acquired FINELINE PROTOTYPING in April 2014 and portions of ALPHAFORM AG in October 2015. Both companies were AM service providers. AM services accounted for 14% of total revenue at PROTO LABS in 2020. In January 2021, PROTO LABS acquired online manufacturing platform 3D HUBS for $280 million with a combination of cash and stock (with the potential for an additional $50 million in consideration if 3D HUBS meets performance targets). AM services accounted for about one third of 3D HUBS revenue at the time of the acquisition. PROTO LABS trades on the NYSE.