Shapeways, Inc. (SHPW) has disclosed its financial results for the fourth quarter and full year of 2023, indicating a steady performance with revenue growth and gross margin expansion. The company reported a 9% increase in fourth-quarter revenues, reaching $9.5 million, and a 500 basis point improvement in gross margins to 46%. Despite these positive results, Shapeways is actively pursuing strategic alternatives, including the potential sale of significant parts of its business, in response to ongoing macroeconomic and industry pressures.
Key Takeaways
- Shapeways' fourth-quarter revenue grew by 9% year-over-year to $9.5 million.
- Gross margin expanded by 500 basis points to 46% in the fourth quarter.
- Revenue from the top 250 customers increased by 29% for the full year 2023.
- The company signed a $1.5 million multi-year contract with a leading American automotive manufacturer.
- Shapeways launched a CNC Instant Quote feature post year-end.
- Adjusted EBITDA for the fourth quarter showed an improvement, with a loss of $5.1 million.
- Shapeways implemented cost-saving measures, including a 15% reduction in workforce.
- The company is exploring strategic alternatives, such as selling parts of its business.
Company Outlook
- Shapeways expects first-quarter 2024 revenues to be between $8.3 million and $8.6 million.
- The company continues to focus on enterprise manufacturing and software revenue growth.
- Shapeways is actively engaged in discussions regarding the sale of its manufacturing or software businesses.
Bearish Highlights
- The company faces elongated sales cycles for enterprise sales and slower adoption of software features.
- Full-year adjusted EBITDA was a loss of $22.5 million, larger than the previous year's loss of $19.8 million.
Bullish Highlights
- The strategic focus on enterprise sales has resulted in significant growth from top customers.
- New CNC Instant Quote feature aims to capture a share of the $68 billion global CNC market.
Misses
- Full-year revenue growth was modest at 4%, partially offset by lower sales from the marketplace and self-service segments.
- Non-cash impairment charges, including a $3 million charge for equipment and a $1.1 million goodwill impairment, were recognized.
Q&A Highlights
- The company's top 250 customers showed a 29% year-over-year growth.
- Shapeways is evaluating the timeline for strategic alternatives and aims to update shareholders in the coming quarter.
- Current cash burn is approximately $1.6 million per month, which is expected to improve with revenue growth and cost reductions.
Shapeways' report indicates a company in transition, managing to grow in certain areas while also seeking strategic solutions to enhance shareholder value. The pursuit of strategic alternatives suggests a significant shift in the company's future operations, with the potential sale of either its manufacturing or software business segments. As the company continues to navigate the challenges of the current economic climate, stakeholders and investors are watching closely for the next steps in Shapeways' strategic evolution.
InvestingPro Insights
Shapeways, Inc. (SHPW) has shown resilience in its fourth-quarter performance, but InvestingPro metrics and tips shed further light on the company's financial health and market position. The company's market capitalization stands at $13.06 million, reflecting its size in the industry. Despite a challenging economic environment, Shapeways reported a 3.93% revenue growth in the last twelve months as of Q1 2023, which aligns with the reported increase in fourth-quarter revenues. The Price / Book ratio, a measure of market valuation, was at a relatively low 0.49 in the same period, indicating that the stock may be undervalued compared to the company's book value.
InvestingPro Tips highlight that Shapeways is trading at a low revenue valuation multiple, which may appeal to value investors looking for potential bargains. However, it is essential to note that the company is quickly burning through cash, which is a critical factor for stakeholders to consider, especially given the current cash burn rate mentioned in the Q&A highlights. This rapid cash depletion is a concern that could impact the company's ability to sustain operations without additional funding or a successful strategic shift.
InvestingPro users can access an additional 14 tips for SHPW to gain deeper insights into the company's financial performance and market expectations. These tips include observations on the company's cash position relative to debt, profitability expectations for the year, and stock price performance over various time frames. For instance, while Shapeways has seen a significant return over the last week, analysts do not anticipate the company will be profitable this year, and the stock has taken a big hit over the last six months.
For a comprehensive analysis and more tailored insights, interested investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This offer includes access to real-time data, advanced metrics, and expert analysis that can help investors make more informed decisions.
Full transcript - Galileo Acquisition (SHPW) Q4 2023:
Operator: Good afternoon ladies and gentlemen, and welcome to Shapeways Fourth Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode. [Operator Instructions] This call is being recorded on Thursday, March 28, 2024. I would now like to turn the conference over to Nikki Sacks with Investor Relations. Please go ahead.
Nikki Sacks: Greetings, and welcome to Shapeways fourth quarter and year-end 2023 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. As a reminder, the conference is being recorded. Before we get started, I'd like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, statements regarding our business strategy, future financial and operating performance, projected financial results for the first quarter of 2024, timing or results of any strategic transactions or future cost-cutting measures, new offerings and market opportunity are based on current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For descriptions of the risks and uncertainties associated with our business, please see the company's SEC filings, including the company's annual report on Form 10-K for the year ended December 31, 2023. The information provided in this conference call speaks only to the broadcast date today, March 28, 2024. Shapeways disclaims any obligation, except as required by law, to update or revise forward-looking statements. Also, during the course of today's call, we refer to adjusted EBITDA, which is a non-GAAP financial measure. There is a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after market close, which can be found on our website, shapeways.com. On the call today are Greg Kress, Chief Executive Officer; and Alberto Recchi, Chief Financial Officer. And now, I'd like to turn the call over to Greg. Greg?
Greg Kress: Good afternoon, everyone. Thanks for joining us to discuss Shapeways fourth quarter and year end 2023 financial results, progress on our key initiatives and an update on our strategic alternatives. I will begin by providing a business update. And Alberto Recchi, our CFO will then discuss our financial results. In the fourth quarter and year-to-date 2024, we've continued to execute our strategy to grow enterprise manufacturing and software revenues, as well as make progress on exploring strategic alternatives to maximize shareholder returns. Our fourth quarter results were in line with our expectations, as we grew revenues by 9% from the prior year quarter to 9.5 million and realized 500 basis points of gross margin expansion to 46% compared to the same period in 2022. These results reflect the progress of our enterprise manufacturing sales effort and higher contribution from our software offerings. In terms of enterprise sales, we've continued to provide our high-quality enterprise-level manufacturing solutions to customers focusing on our target industries of automotive as well as medical, robotics and other industries. For example, we've made traction in the automotive industry, as our solutions to force dynamic production demands with both additive and traditional manufacturing capabilities. We have seen success with Tier 1 supplier and OEM direct multiyear production contracts and post year end signed a $1.5 million multi-year contract with an industry leading American automotive manufacturer. This was an expansion of a prior contract with this customer, who leverages Shapeways expansive additive and traditional manufacturing capabilities. This is just one example of how we have continued to increase our share of wallet with existing customers on multiyear revenue projects. For the full year 2023, revenue from our top 250 customers grew 29% compared to the prior year. Shapeways solution support companies across the globe with their supply chain challenges by providing enhanced flexibility and production. This includes offering additive manufacturing, which we have discussed previously but also traditional manufacturing methods, such as Computer Numerical Control or CNC, which has an estimated $68 billion global market in 2023. To further expand this market, subsequent to year end, we launched a new CNC Instant Quote feature, which enables our customers to seamlessly access CNC manufacturing capabilities and enhance our robust suite of enterprise manufacturing solutions. In terms of software business, during the year, we launched several key features to create a more comprehensive software offering, including enhancements to our ordering service and the ability for customers to source discounted material using energy materials platform. Finally, I will provide an update on our cost saving initiatives and strategic alternatives process. We are seeing ongoing near-term challenges including an elongated sales cycle for enterprise sales and longer than anticipated adoption of software features. In light of this backdrop, as we previously disclosed, we have made cost savings measures to better align our cost structure with our growth expectations over the near-term to reduce cash burn. These measures include reductions in force completed in the fourth quarter of 2023, a reduction in new hires, and a reduction in non-critical capital and discretionary operating expenditures. Additionally, as we discussed last quarter, we have been working with advisers and considering strategic alternatives including without limitation, a sale of a material portion of the company's assets, a merger, business combination, liquidation of certain assets, or other strategic transactions to maximize shareholder value. Based on market checks conducted by our advisers as well as preliminary discussion with and feedback from potential purchasers, in light of the continued macroeconomic and industry pressures, the company is actively taking steps to sell a material portion of the company's assets. In the course of these preliminary discussions, potential purchasers have indicated an interest in acquiring either the company's manufacturing business or the software business, but not both. We continue to evaluate strategic alternatives with regard to both the manufacturing and software businesses, including ongoing discussions with potential acquirers. The company has not yet signed a definitive agreement with respect to either the manufacturing or software assets and we can provide no assurances that any of these processes will result in any transaction. However, we will provide updates as appropriate. While we are exploring what is best to maximize shareholder value, we will remain disciplined and prudent as we execute our operating plan. I would like to thank the entire Shapeways' team, our customers, our investors, and all of our stakeholders for their ongoing support. Alberto will now discuss our financial results in more detail.
Alberto Recchi: Thanks Greg. I'll provide a recap of the fourth quarter and full year 2023 performance, give an update on our balance sheet position, and provide guidance for the first quarter. For the fourth quarter, revenue increased to $9.5 million, up 9% from the prior year period. For the full year, revenue was up 4% to $34.5 million with growth in software enterprise sales, partially offset by lower sales from marketplace and self-service. Our gross margins in the fourth quarter were 46% compared to 41% in the fourth quarter of 2022 and were 42% for the full year as we saw more contribution from higher margin software sales, the benefits from the consolidation of our U.S. manufacturing operations, and increased volumes from our enterprise sales. Fourth quarter adjusted EBITDA was a loss of $5.1 million an improvement from a loss of $5.6 million in the fourth quarter of last year. And full year adjusted EBITDA was a loss of $22.5 million compared to a loss of $19.8 million in the prior year period. SG&A expenses for the fourth quarter were $9.2 million compared to $7.3 million in the prior year period. As Greg mentioned, in the fourth quarter, we implemented cost alignment initiatives including a reduction in force of 15% of our total global employees included in OpEx. We anticipate realizing approximately $6.2 million in annualized cost savings as a result of the reduction in force combined with the elimination of certain open positions. In the fourth quarter, we recognized non-cash impairment charges. These included $3 million related to equipment that was being held for sale. In addition we recognized a $1.1 million goodwill impairment charge related to goodwill recorded at the time of the purchase of MFG, which we believe has a declining value in the current market conditions and based on the feedback from our strategic alternatives process. Turning to our balance sheet. As of December 31, 2023, our cash and cash equivalents and marketable securities total 12.2 million. During the quarter, we deployed approximately 5.4 million in cash, which was an improvement on the cash deployed in the previous quarter and demonstrates our focus on further improving our cash flow. Looking ahead for the first quarter of 2024, we anticipate revenues to be in the range of $8.3 million so $8.6 million. With this, we completed our prepared remarks and will now open the call for question. Operator?
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Greg Palm from Craig-Hallum Capital Group. Please go ahead.
Greg Palm: Yeah, thanks. Good afternoon everybody. Greg you talked about a strategic, or I guess a revenue growth number from your top accounts? I know strategic or enterprise has been a key focus. So wondering if you can give us an overall update there and I missed exactly what that number is. So if you could clarify.
Greg Kress: Hey, thanks for joining Greg. Yeah, so we've seen a considerable momentum on the enterprise side of our business as you know throughout the year we've spent time and energy focusing on that. If we carve out and just kind of isolate our top 250 customers, they grew over 29% year-over-year versus the prior year. So we see that continued investment in those sales resources that are focused on very specific industries and bringing real solutions to our customers. Not only are we bringing on new customer acquisition, but we are seeing those customers continue to expand their wallet. So we're happy with the progress there and we're seeing good results so far.
Greg Palm: Got you. And then just your follow-up on the on the process I'm curious how you view the time line from here and how you're measuring success from -- does the potential sale of either asset or more assets? And again just how you're thinking about creating shareholder value from that going forward?
Greg Kress: Yeah. I mean ultimately we're taking a big step back and thinking about what we should be doing with the company. The company continues to show have a really, really strong foundation continues to show momentum in certain areas, but remain small and somewhat subscale for the expenses of being a public company and so re-evaluate how do we approach that and so right now we can't share too much, but we are having conversations and we wanted to make sure people were aware that. I think over the next quarter, we'll be able to provide another update as we make more progress having conversations with strategic alternative.
Greg Palm: Okay. And then just one quick one. Cash burn expectations for the year what should we think?
Greg Kress: I mean, right now we're still seeing about 1.6 million of cash burn per month. That does improve as we continue to grow top line revenue conserve cash from reducing operating expenses. But right now from a modeling perspective, I would say we're currently running at that $1.6 million.
Greg Palm: Okay, perfect. I will leave it there. Thanks.
Greg Kress: Thanks. Greg.
Operator: Thank you. There are no further questions at this time. Mr. Kress please proceed.
Greg Kress: I just wanted to take a time and thank everyone for joining us today on behalf of myself and the Shapeways team. Thanks for joining the call. We look forward to providing additional updates in the coming months. Thanks everyone.
Operator: Thank you. That concludes our conference today. Thank you for participating. You may all disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.