The two largest publicly traded 3D printer companies, 3D Systems and Stratasys, both published their quarterly financials. Who’s winning?
First let’s look at Stratasys.
The big news from their report indicates their revenue for first quarter 2018 was actually six percent LESS than the same period in 2017. That is definitely not good news for the 3D printer manufacturer.
The company has been making significant changes during the past year, even including the release of what was billed as their fastest selling system, the F series.
There was some news, however, in that their gross margin was a bit more profitable, up two percent in GAAP statistics. Another piece of good news was that their quarterly loss dropped by almost a million USD$, suggesting they made more money on less revenue. Efficient, but still a loss.
The fact that they had a loss is not entirely disturbing because the company holds significant capital to draw from for many years at this rate.
What is possibly disturbing is the drop in revenue, which suggests they are not drawing in as many customers for some reason. Usually that reason is competition, and in recent months Stratasys has seen more competitors than ever before. There are practically dozens of small companies with inexpensive products that are nipping away at Stratasys’ core FDM business.
Stratasys explains the drop thusly:
We are disappointed with our revenue for the first quarter, which is primarily attributed to underperformance in North America related to high end system orders, specifically from customers in government and other key verticals such as aerospace and automotive.
We do not believe that our first quarter revenue represents a fundamental change in the demand environment in the North American market. We continue to maintain a strong pipeline of opportunities, and are not modifying the full year guidance we issued earlier this year. Despite our revenue results in the period we continued our positive trend of operational discipline and cash generation. We remain committed to our investments in long-term initiatives that include advancements in our core FDM and PolyJet technologies, new metal additive manufacturing platform, advanced composite materials, and software and application development.
That may be true, but the market did not like what they heard and as a result Stratasys’ stock price (SSYS) dropped from around USD$20 to just under USD$18 after the announcement. That’s significant, losing close to 10% in a single day.
Other major 3D printer manufacturers also took a dip, perhaps with investors somehow fearing the Stratasys results reflect a larger pattern in the industry.
How did 3D Systems fare?
Quite a bit differently. For starters, their revenue rose quarter over quarter by six percent. Coincidence? More than likely so, as the buyers have many options aside from these two companies to consider.
The bad news for 3D Systems is that their net income for the quarter was negative, again. And even worse, it was more than double the same quarter in 2017, rising to over USD$20M.
Like Stratasys, 3D Systems holds significant cash reserves, in their case something getting close to half a billion USD$. So they are also not in any way in trouble with future cash flow.
In 3D Systems’ filing, they explain that healthcare product sales increased over 21% and now comprise almost one third of the company’s revenues. That’s significant; our suspicion that 3D Systems is drifting towards being a healthcare company may becoming true.
Their software product line, which is largely based on products they acquired over the past decade also rose significantly in revenue by almost 13%.
These two admissions suggest that the remainder of their revenue, sales of printers, materials and services, were lower and brought down the total growth to six percent.
That’s a bit disturbing. If both companies seem to be having trouble selling machines, that could very well be a pattern in industry, thus explaining the market reaction. However, in their earnings call 3D Systems explained further that printer unit sales were up a staggering 44%, with printer revenue up some 24%. In other words, selling a lot more lower-priced machines. Thus it seems the drag on their revenue is actually elsewhere, and it appears to be 3D print services, which were reported to be up only 2%.
But the industry is far larger than just these two companies. In past years, they may have been hugely dominant, but that’s no longer the case. As their respective patents on the original 3D printing processes expired, countless competitors have erupted and many are growing very strongly.
You just don’t see them on the stock market. At least, not yet.