MakerBot Closes Stores And Fires Staff After Missing Financial Targets
The 3D printing company has laid off about a fifth of its staff and closed its three retail stores. It's a reality check for the 3D printing industry.
MakerBot, the buzzy maker of 3D printers, is going through a painful retrenchment after a period of rapid growth.
The Brooklyn-based company failed to meet ambitious targets for 2014 financial performance, and laid off about 120 employees on Friday, roughly a fifth of its staff, people familiar with the company told BuzzFeed News. MakerBot also closed its three retail stores, including its flagship location in Manhattan, according to an announcement posted to the company's website.
The moves are a humbling reversal for MakerBot, which was founded in 2009 and acquired by a bigger 3D printing company, Stratasys, for more than $400 million in 2013. Stratasys, which sells printers to business customers for prototyping and manufacturing, saw the MakerBot deal as a way to reach the designers, hobbyists, and other consumers who used the startup's futuristic-seeming printers to create all manner of plastic objects.
But 3D printing, once a hot new category that seemed to many like the next big thing, remains a niche product. A report last summer from the research firm Gartner predicted that mainstream adoption of the technology was still five to ten years away.
For MakerBot, hype around its 3D printers translated into lofty financial goals that proved to be too ambitious.
The goals were set in 2013. Stratasys, in announcing the MakerBot acquisition, said it would pay up to $201 million in additional cash or stock, based on the Stratasys stock price at the time, if MakerBot met certain targets that were not disclosed.
In addition, according to regulatory filings, certain MakerBot employees were promised bonuses that would equal the value of the additional acquisition payment.
With financial incentives dangling before it, MakerBot expanded rapidly and scrambled to roll out new products, according to current and former employees. It hired about 200 new employees after the deal closed in 2013, one person familiar with the company said.
Among the new initiatives, MakerBot opened new retail stores in Boston and Greenwich, Connecticut, expanding beyond its initial retail location in Manhattan. It introduced 3D-printed Sesame Street figurines in an online store. And it announced three new 3D printer models in a single product launch in early 2014.
The initial results contributed to a feeling of confidence. MakerBot reached its financial target for the second half of 2013, with shareholders earning a $10.8 million payout, according to regulatory filings.
In January 2014, Stratasys said it expected MakerBot's annual sales to grow at a rate above 25%.
But after months of optimistic announcements, MakerBot's results began to erode toward the end of 2014. Its revenue for the fourth quarter of the year came in at $26.6 million, only about 7% higher than in the period a year earlier. (Data on the full-year sales growth has not been separately disclosed.)
In December 2014, Stratasys recorded a $102 million write-down related to MakerBot, effectively acknowledging that it paid too much for the company. In a recent filing, Stratasys cited "slower growth of MakerBot product and service revenues in the fourth quarter, challenges associated with the introduction and scaling of its new product platform, changes in timing of implementation of certain initiatives and changes in MakerBot's distribution model."
MakerBot, Stratasys said, fell short of the financial targets for 2014, failing to earn the additional earn-out payments.
After weeks of rumors, employees learned of the layoffs on Friday. They were reported earlier by Vice's Motherboard section.
"It's a painful day, but we know why it had to happen," said one MakerBot employee who kept their job, and who spoke to BuzzFeed News on the condition of anonymity. "They were just recklessly growing this company, bringing on people at a rate that was just insane."
Representatives of Stratasys did not respond to requests for comment. In the announcement on MakerBot's website, David Reis, the CEO of Stratasys, said the store closures, along with layoffs and cost cutting, are "part of the continued scaling of MakerBot."
MakerBot is making the changes under a new CEO, Jonathan Jaglom, who took over in March from Jenny Lawton. Lawton, who had been in the top job only since September, was the successor to Bre Pettis, MakerBot's co-founder.
The Manhattan retail store, which sold printed objects and offered instructional courses, served as a gathering place for 3D printing fans. On Friday, the windows were barred and a handwritten note on the door alluded to the closing:
"We appreciate your patronage. Please check us out at www.makerbot.com."