3D Systems (DDD, Financial) had released a preliminary set of numbers for the third quarter a few weeks back, and this Monday, November 10, the actual audited third-quarter results were out – well, the actual figures did not offer much of a surprise to analysts and investors. But the outlook projected by the company during the earnings presentation did give some interesting insights to investors and also gave some relief to the worried lot. Let’s dive in to find out the highlights of the earnings call that could add on to the investors’ knowledge quotient.
The quarter number mix
3D Systems reported a 23% year-over-year increase in revenue to $166.9 million. Net income was down to $3.1 million from $17.7 million reported in the similar quarter of last year. Wall Street was anticipating a shortfall in revenue but the result fell short of analysts’ expectations of $6.9 million for the quarter.
On a GAAP basis, earnings came in at $0.03 a share, plummeting 82.4% from $0.17 a share a year earlier. The management have shared the opinion that such impact on the bottom line was mainly due to the surge in cost of operations which increased the company expenses. Though demand for products remained strong, the company failed to reap the benefits fully, as manufacturing and delivery constraints weighed down heavily on its earnings.
However, if expenses such as acquisition expenses and other adjustments are not considered, the company reported earnings of $0.18 a share, which beat the Street expectations by a penny.
The company’s order book increased by $14 million, or 44% sequentially to $46 million, and included a $4 million increase in printer orders in hand compared to the second quarter order book, reflecting the robust demand for 3D printers.
Once again, in this quarter, the bulk of the revenue contribution came from design and manufacturing services in which revenue improved 27% to $155.2 million and showed a 57% increase in number of units sold in the quarter. Healthcare revenue was the biggest gainer, increasing 121% to $37.4 million. But consumer revenue was stuck at $11.8 million as the company continues to face manufacturing issues. 3D’s CEO, Avi Reichental, stated, “We are pleased that strengthening demand led to a 57% organic increase in unit sales of our design and manufacturing printers, but are disappointed that we failed to fully capitalize on the robust demand for our direct metal and consumer products…”
But despite the weakness seen in the quarter, the management seems to be optimistic on the company’s upcoming future.
Headwinds are at all-time low
For two consecutive quarters, the company has highlighted manufacturing constraints for its direct-metal 3D printers to be the cause of negativity seen in the quarterly results. However, the CEO doesn’t expect these issues to hold much weight on operating results in the next quarters. In the earnings call, he stated, “Despite our efforts, we were not able to deliver these direct metal and consumer products as soon as we anticipated. Now that these availability gaps have been resolved, we expect our revenue growth rate to increase…”
Throughout the call, the management have noted that there are no manufacturing concerns any longer, and that the company has started shipping its previously delayed consumer 3D printers. Hence, investors can expect the results to show an upsurge in the next quarter.
EuroMold 2014 to become the introductory hotspot
The company expects to introduce several new products at EuroMold 2014, the world’s largest 3D printing conference, held in Frankfurt, Germany. According to the management, “We are bringing to EuroMold 2014 our most advanced design and manufacturing products ever, including a completely new generation of Direct Metal Printing (DMP), Stereolithography (SLA®) and Selective Laser Sintering (SLS®) printers and materials… We are also debuting the full power of our design-to-manufacturing digital thread with cloud and desktop functionality and utility.”
Since 3D’s technology has been the driving force behind significant advancements in product design and manufacturing for leading automotive, aerospace, electronic, energy and healthcare companies, it plans to showcase the customers the latest innovations and products at its booth during the EuroMold 2014 show towards the end of the month.
The management has already revealed that the larger format direct-metal 3D printer would be called the ProX 400, which could help to cater better to large scale industrial manufacturers. And probably it will be a part to this show as well.
Cash position still firm
The company has generated $8.6 million of cash from operations during the third quarter and $27.9 million in the nine months ended September of the fiscal year. Of the total cash generated, more than 80% has been spend in acquisitions while only around 6% has been used as capex. Remarkably, the cash in hand as on September 2014 has improved by $71 million compared to December 2013.
Last word
The company enters Q4 with a record order book, positive sales momentum, product availability gaps addressed and the most comprehensive portfolio of 3D products – this in turn should convert into a more sustainable, profitable growth in the next quarter of this fiscal year. All eyes are now set on EuroMold 2014 that will give further insight into the new product range which will hopefully create an increased demand for the company’s 3D products. So let’s stay tuned!
