3D Systems' Earnings Decline, but 3D Printer Revenue Jumps 24%
3D Systems (NYSE: DDD) released its first-quarter 2018 results after the market close on Wednesday.
The diversified 3D printing company's revenue increased 6.1% year over year, driven by growth in 3D printers, healthcare, and software. Its net loss widened 11% to $0.10 per share, and, on an adjusted basis, it posted a net loss of $0.03 per share, versus earnings per share of $0.06 in the year-ago quarter.
Shares declined 2.4% in after-hours trading on Wednesday, which we can probably attribute to the bottom line falling short of what many investors were likely expecting.
3D Systems' key quarterly numbers
| Metric |
Q1 2018 |
Q1 2017 |
Year-Over-Year Change |
|---|---|---|---|
| Revenue (or sales) |
$165.9 million |
$156.4 million |
6.1% |
| Operating income |
N/A | N/A | N/A |
| Net income |
N/A | N/A | N/A |
| Adjusted net income |
($3.4 million) | $7.1 million | N/A |
| GAAP earnings per share |
N/A |
N/A |
N/A |
| Adjusted EPS |
($0.03) |
$0.06 |
N/A |
GAAP gross margin was 46.9%, down from 51.3% in the year-ago quarter. Cost reduction initiatives were offset by the mix of sales and continued investments in services and on-demand manufacturing. The company used $1.5 million of cash from operations and ended the quarter with $121.6 million of cash on hand.
Long-term investors shouldn't place too much weight on Wall Street's near-term estimates. But for context, analysts had been looking for adjusted EPS of $0.01 on revenue of $159.6 million, so the company missed on the bottom line but beat on the top line.
Segment results
| Segment |
Q1 2018 Revenue |
Q1 2017 Revenue |
Year-Over-Year Change |
|---|---|---|---|
| Product |
$105.1 million |
$97.0 million |
8.4% |
| Service |
$60.8 million |
$59.4 million |
2.4% |
| Total |
$165.9 million |
$156.4 million |
6.1% |
Management outlined on the earnings call how key categories performed:
- 3D printers (within product): Revenue jumped 24% year over year to $39.1 million on 44% higher printer unit sales.
- Healthcare solutions: Revenue grew 21% to $52.4 million. (This category spans both segments and overlaps other categories.) This isn't all organic growth, as results got a boost from the acquisition in the first quarter of 2017 of a company that makes dental materials.
- Software (within product): Revenue increased 13% to $23 million.
- On-demand part manufacturing (within service): Revenue edged up 2% to $25.7 million.
- Materials (within product): Revenue was approximately flat at $42.5 million. This category also got a lift from the above-mentioned acquisition.
The healthcare business, which now accounts for about 32% of total revenue, is a consistently good performer.
The positive surprise was the strong 3D printer revenue growth of 24% year over year. This metric came in flat in the previous quarter and had been steadily sliding for three years. This robust result following the fourth quarter's flat performance suggests 3D printer revenue has finally bottomed and is now rebounding. 3D printer sales are crucial to 3D Systems' razor-and-blade-like business model because they drive sales of the high-margin print materials. The quarter's solid 3D printer sales should boost material sales starting in the second half of the year and more fully in 2019, management said on the earnings call.
What management had to say
Here's what CEO Vyomesh Joshi had to say in the press release:
Looking ahead
Results for 3D Systems were a mixed bag. The two notable positives were the strong revenue growth in 3D printers and the healthcare business. That said, the company's profitability from both a GAAP and an adjusted basis worsened from the year-ago quarter.
3D Systems has recently begun launching its broad lineup of new products slated for release this year. Production systems based on its fast Figure 4 technology will begin shipping this summer, management said on the earnings call. A lot hinges on Figure 4 sales, so they should be a main focus for investors later this year and in 2019.
Management didn't provide full-year 2018 guidance.
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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool has a disclosure policy.