A faucet handle printed from 3D Systems' ProJet MJP 2500, IMAGE SOURCE: 3D SYSTEMS
3D Systems Inc. (DDD 6.96%) is set to release third-quarter 2016 results Thursday, Nov. 3. With shares up around 7% over the past three months after last quarter's solid report -- but down sharply after touching a fresh 52-week high last month -- what can we expect to hear from the additive manufacturing specialist this time?
On strategy
For one, this will mark the third report through which we get the hear the perspective of CEO Vyomesh Joshi, who took the helm in April, after former 3D Systems CEO Avi Reichental abruptly resigned.
That's not to say these reports are the only chance investors have had to receive added clarity into their business. As fellow Fool Steve Heller pointed out last month, in September Joshi used this year's International Manufacturing Trade Show to discuss the company's long-term strategy to return to growth and achieve sustained profitability. More specifically, 3D Systems is striving to position itself to take advantage of an impending transformation of the 3-D printing industry, Steve wrote, whereby "it will transition from mostly prototyping uses to a viable manufacturing platform."
In addition, 3D Systems unveiled an updated version of its Figure 4 printing platform, launched its new 3DXpert software to simplify metal additive manufacturing workflows, and announced a new partnership with design software specialist PTC. But investors would be wise to listen closely during this quarter's call for any additional traction, initiatives, partnerships, or products to this end as it works to capitalize on the coming manufacturing-centric 3-D printing boom.
3D Systems' headline numbers
That said, 3D Systems has not provided formal financial guidance as it institutes its strategic plan. Rather, according to new CFO John McMullen -- who took his post this past June:
[W]e are in the middle of a very rigorous three-year planning process. And from what we can see today, if we execute very well on the operational initiatives that we have in place now and we are beginning to execute on, we have the opportunity for both revenue and earnings growth in 2017 and continued positive cash flow from operations, and we can build on that going into 2018 and 2019.
To be sure, 3D Systems is cash flow-positive, having generated $12 million of cash flow from operations and $9.5 million in free cash flow last quarter alone. It also ended last quarter with cash on hand of $176.2 million. McMullen reiterated during last quarter's call that the company will work "to improve working capital performance and overall cash flow" through the rest of this year and into 2017.
For perspective, while the company remains unprofitable based on generally accepted accounting principles -- and with the caveat that we don't normally pay close attention to Wall Street's near-term demands -- analysts' consensus estimates predict that the company will see revenue climb 5.7% year over year this quarter, to $160.2 million, and translate to adjusted earnings (which excludes items such as stock-based compensation and acquisition expenses) of $0.09 per share.
3D Systems will also break its top line down into sales generated from both products (down 9.3% year over year last quarter, to $94.9 million), and services (down 4.1% last quarter, to $63.2 million). Within that, management will probably provide added color with more specific results for market sub-segments and products, including healthcare revenue (up 11% last quarter, to $38.8 million), on-demand manufacturing services (down 20% last quarter, to $27.1 million), and actual sales of 3-D printers (down 30%, to $32.3 million). And in keeping with 3D Systems' razor-and-blades model, investors should listen for updates on materials revenue, which climbed 12% year over year in Q2, to $40.6 million.
Of course, it remains to be seen whether 3D Systems will live up to the market's expectations, especially given Wall Street's handicap as it lacks formal guidance to sway its modeling. But in the end, arguably most important this quarter will be whether 3D Systems continues to make progress in positioning itself for the ongoing transition of 3-D printing into a driving force in wide-scale manufacturing.
