3D Systems Corporation's Best Business Segment in 2016 So Far

By Markets Fool.com

Simulating a medical procedure. Image source: 3D Systems.

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Thus far, 2016 has been a challenging for 3D Systems (NYSE: DDD). During the first six months of 2016, the 3D printer maker's revenue fell 6.2% year over year to $310.7 million. This weakness was primarily driven by falling 3D printer sales an ongoing issue since customer demand began slowing in early 2015. Most recently, 3D Systems' second-quarter 3D printer sales fell 30% year over year -- a steeper fall from the 17% decline in the first quarter.

As concerning as it is for a 3D printer company's printer sales to be falling at an accelerated rate, 2016 hasn't been an entirely negative situation for 3D Systems. Most notably, 3D Systems' healthcare segment has been a steady growth engine -- arguably the company's best business segment in 2016 so far.

Holistic healthcare

3D Systems has taken a holistic approach in healthcare. Its offerings enable customers to simulate, plan, rehearse surgeries, as well as 3D print surgical instruments, medical implants, and dental devices. According to 3D Systems' CEO Vyomesh Joshi, this end-to-end approach -- from conceptualization to final product -- has been a major contributor to 3D Systems' success in healthcare.

Period

2015 Revenue

2016 Revenue

Annual Change

First quarter

$30 million

$33.5 million

11.7%

Second quarter

$34.8 million

$38.8 million

11.5%

Total

$64.8 million

$72.3 million

11.6%

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Data source: 3D Systems.

Against the backdrop of falling 3D printer sales, taking a holistic approach appears to resonate well with customers. It also reinforces that there's likely an opportunity for 3D printing companies to generate meaningful growth outside of 3D printer sales.

A blueprint for success

During 3D Systems' second-quarter earnings call, Joshi highlighted that he wants to replicate the company's successful approach in healthcare to other major target segments as a way to drive growth:

And the process we want to take is by vertical market. The proof is like healthcare. So, healthcare grew 11% this quarter. And this is a great example of how we have really put together a vertical approach for specific market. And that domain knowledge and that solution approach in healthcare, I want to replicate and scale for automotive, for aerospace, for consumer goods, and for teaching and training institutes. I think that's the approach. And then, once you see that, then you're going to see the growth that we want to have a sustainable growth in the market and we want to be number one player in that particular market.

Essentially, 3D Systems wants to build a complete suite of offerings that cater to specific markets andenable customers to digitize, design, simulate, prototype, inspect, and manage their entire workflow.Given this emphasis, which Joshi believes is a more valuable proposition than merely offering a 3D printer for sale, it's clear that 3D Systems wants to own more of the 3D printing process in the future.

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Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.