Shares of 3D printing companies have had a terrible run on the Street during that last one year and all are in the negative territory, thereby disappointing investors. I had covered 3D Systems (DDD, Financial) here, and in the current piece I will be looking at yet another 3D printing solutions provider – Stratasys (SSYS, Financial) after the company released its first quarter fiscal 2015 results.
Looking back
Stratasys started fiscal 2015 on a bad note.
First, despite the top-line growth, it missed Trump analysts’ estimate of $178 million. The top line was negatively affected by currency exchange rate and weak performance of MakerBot business. Management said that MakerBot business declined 18% year over year during the quarter. Product revenues declined 2.2% year over year and, had it not been for a solid 112% jump in the Services segment, top-line numbers would have looked worse.
Second, the company posted adjusted loss of $0.15 per share, far more than consensus estimates of $0.12 per share. Moreover, this was a horrible number compared to earnings of $0.32 per share in the year-ago quarter.
Few more negatives
- On an organic basis, which excludes the impact of acquisitions, revenue growth was flat versus the year-ago quarter.
- Gross margin contracted 750 basis points, or bps, to clock 53%, primarily due to increase in cost of sales.
- Adjusted operating expenses increased around 38% year over year.
- Operating expenses as a percentage of sales expanded by 940 bps year over year on the back of acquisitions and expenses on sales, market and product innovation research.
- Inventories increased sequentially from $123 million to $131 million
- Cash and cash equivalents at the end of the quarter declined sequentially from $442.1 million to $423 million.
Few positives
- Customer support and maintenance contract revenue increased 28% year over year, signifying a growing installation base.
- Services revenue more than doubled, mainly on account of revenue contribution of Solid Concepts and Harvest Technologies, which were acquired during the third quarter of 2014. So though not organic growth, but it does provide additional revenue stream.
- Consumables revenue surged 18% year over year on the back of increased system utilization, as well as growing installed base of systems.
- The company has zero debt on balance sheet and cash of about $400 million.
Looking forward
Stratasys reiterated its guidance, which was revised downwards on April 28. The company now expects fiscal 2015 revenues to be in the range of $800 to $860 million, substantially down from earlier guided range of $940 to $960 million. This is way below consensus estimates of $948 million. EPS is expected to be in the range of $1.20-$1.70.
Conclusion
The stock has lost over 56% year-to-date and with the current negative sentiments around the 3D printing industry, it will not be surprising if the stock drops further. 3D printing stocks have become a sure way of losing money.
The first-quarter results were depressing. The full-year guidance has been revised downwards from earlier guided range. Though the industry potential may not have changed with a bad quarter, but I don’t think that the current weak spending environment by the prospective clients is going to change all of a sudden. So, I would suggest staying away from this stock, as one more bad quarter can really mean losing lot more money.
