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The two leading diversified 3D printing companies, 3D Systems Corporation (DDD 1.07%) and Stratasys Ltd. (SSYS +0.63%), have now both reported their second-quarter 2016 results. So, we're going to run them through a metric-to-metric comparison to determine which one generally performed better.
The findings should be helpful in making investing decisions in this space. Keep in mind the following caveats: We're looking at just one quarter's results, qualitative factors can be just as important as quantitative ones, and future results are more important than current ones.
Revenue
|
Company |
Q2 2016 Result |
|---|---|
|
3D Systems |
7.3% year-over-year decline to $158.1 million |
|
Stratasys |
5.6% decline to $172.1 million |
Data source: Q2 earnings reports.
Advantage: Stratasys
Stratasys wins because it generated the most revenue in the quarter -- you can read my full take on the company's earnings here -- and its revenue declined slightly less from the year-ago period than 3D Systems' did. (On a continuing operations basis, both companies' revenue declined about the same percentage. 3D Systems exited the consumer business in late 2015, which added to its total revenue decline.)
Both companies have been struggling to grow revenue since the first quarter of 2015, when the widespread slowdown in demand for enterprise 3D printers began. Stratasys has long attributed this slowdown to a glut of 3D printers in the field due to the large numbers of machines that were purchased during the previous few years. Management has said on more recent earnings calls that it believes the increased number of product offerings customers have to choose from is likely lengthening the sales process.
Another likely factor is that some companies were delaying their buying decisions to see what new offerings would soon be launched. It had been widely known for a while that HP Inc. planned to enter the market; the 2D-printing titan finally launched its own 3D printer in May. And, since last March, the 3D-printing world knew that start-up Carbon (formerly Carbon3D), which launched its speedy printer in April, intended to enter the space.
GAAP* EPS
|
Company |
Q2 2016 Result |
|---|---|
|
3D Systems |
($0.04), up from ($0.12) in Q2 2015 |
|
Stratasys |
($0.36), up from ($0.55) |
*GAAP = generally accepted accounting principles. Data source: Q2 2016 earnings reports.
Advantage: N/A
We can't draw conclusions by directly comparing earnings-per-share results because the companies' numbers of stock shares outstanding aren't the same. Both companies are unprofitable from a GAAP standpoint, so neither is doing well. Compared to the prior-year period's results, 3D Systems' performance is better. However, there are too many moving parts here to make an apples-to-apples comparison.
Non-GAAP or adjusted earnings per share
|
Company |
Q2 2016 Result |
|---|---|
|
3D Systems |
$0.12, up from $0.03 in Q2 2015 |
|
Stratasys |
$0.12, down from $0.15 |
Data source: Q2 2016 earnings reports.
Advantage: 3D Systems
The same comment as above about directly comparing EPS results between companies also applies here. Relative to the prior-year period's results, 3D Systems did a better job. Such a comparison is fair, since one-time factors aren't included in adjusted EPS results.
GAAP gross profit margin
|
Company |
Q2 2016 Result |
|---|---|
|
3D Systems |
50.9%, up from 47.9% in Q2 2015 |
|
Stratasys |
46.2%, up from 45.5% |
Data source: Q2 2016 earnings reports.
Advantage: 3D Systems
3D Systems wins because it has the higher margin, but both companies made progress on this front. Triple-D attributed its gross margin improvement to its shift away from consumer products and increased sales of higher-margin materials, software, and healthcare solutions.
Stratasys attributed its improvement in gross margin to a product sales mix more slanted toward its higher-end systems, including its recently launched J750, the world's first full-color, multimaterial 3D printer, and to its ongoing cost-control efforts.
Non-GAAP gross profit margin
|
Company | Q2 2016 Result |
|---|---|
| 3D Systems |
50.9%, up from 47.9% |
|
Stratasys |
55.9%, up from 54.7% |
Data source: Q2 2016 earnings reports.
Advantage: Stratasys
This metric is calculated by adding back to gross profit one-time items that increased cost of sales. 3D Systems' number is the same as its GAAP gross margin.
Both companies' numbers here are decent, which would generally bode well for their future financial performances once more healthy demand resumes. The wildcard here, of course, is new competition. We don't know how much of the market HP, Carbon, and others will take, and how much pressure they'll put on pricing.
Liquidity
|
Company |
Q2 2016 Result |
|---|---|
|
3D Systems |
$12.9 million in cash from operations generated in the quarter. $176.2 million in cash and cash equivalents at the end of the quarter |
|
Stratasys |
$6.9 million in cash from operations generated. $253.9 million in cash and cash equivalents |
Data source: Q2 2016 earnings reports.
Advantage: Tie
3D Systems generated more cash from operations in the quarter than Stratasys -- a switch from last quarter. Stratasys, however, has more cash on hand, which can be used for growth initiatives, or for operational expenses if times get even tougher. Both companies sport clean balance sheets, with a solid amount of cash and no long-term debt.
Research and development spending
|
Company |
Q2 2016 Result |
|---|---|
|
3D Systems |
13.2% of revenue, down from 15.1% in Q2 2016 |
|
Stratasys |
14.2% of revenue, up from 14% |
Data source: Q2 2016 earnings reports.
Advantage: Stratasys
Stratasys wins here since it spent a larger percentage of its revenue on research and development. It's doing a solid job maintaining a relatively steady -- even in absolute dollars -- R&D spending level. 3D Systems, on the other hand, chopped nearly $5 million from its R&D budget, spending $20.9 million in the quarter vs. $25.7 million in the year-ago period.
Investors should watch R&D spending for both companies going forward. R&D is the lifeblood of companies involved in fast-growing, tech-heavy spaces.
2016 guidance
|
Company |
2016 Guidance |
|---|---|
|
3D Systems |
Has not provided guidance, citing lack of visibility into market conditions. |
|
Stratasys |
Reaffirmed previously issued guidance: revenue of $700 million-$730 million, adjusted EPS of $0.17-$0.43, and GAAP EPS of ($1.60)-($1.28). However, management said it now expects revenue to come in at the low end of the guidance range. |
Data source: Q2 2016 earnings reports.
Advantage: N/A
Stratasys' guidance at the midpoint of each metric implies year-over-year revenue, adjusted EPS, and GAAP EPS increases of 2.7%, 58%, and 95%, respectively. Stratasys said when it issued guidance early in the year that its visibility into future market conditions continued to be murky, which is the reason for the broad EPS range.
The gold goes to Stratasys
In this 3D printing Olympics, Stratasys won three metrics, while 3D Systems won two. Three metrics were either a tie or not applicable as scoring events in the "games." However, 3D Systems won the headlining event for public companies -- earnings -- so there's really no clear-cut winner.
Keep in mind the caveats stated in the opening: We're only looking at one quarter, qualitative factors can be at least as important as quantitative ones, and future results are more important than current ones. Moreover, we didn't look at stock valuations.
As a reminder: Both companies have new CEOs, while 3D Systems also has a new CFO and unfilled COO and CMO slots. Much of their respective success going forward is going to hinge on how well their new top management teams perform.
