Let's compare the first-quarter 2017 results of the two leading diversified 3D printing companies, 3D Systems (DDD 1.32%) and Stratasys (SSYS +5.26%). 3D Systems reported in early May, while Stratasys reported later in the month.
Findings from this face-off should be helpful for making investing decisions in this space, which has heated up in 2017. Shares of 3D Systems and Stratasys are up 67.2% and 58.9%, respectively, this year through June 6.
Image source: Getty Images.
1. Revenue: 3D Systems
|
Company |
Q1 2017 Result |
|---|---|
|
3D Systems |
2.5% year-over-year increase to $156.4 million |
|
Stratasys |
2.8% decline to $163.2 million |
Data sources: Q1 earnings reports.
3D Systems wins since its revenue increased, while Stratasys' declined. However, its advantage isn't as strong as the above numbers suggest because it made an acquisition in the quarter.
Image source: 3D Systems.
3D Systems acquired Vertex, which owns the NextDent dental-material brands, but the company didn't divulge the amount of revenue this acquisition contributed in the quarter. Based upon broad guidelines management provided on the earnings call, a decent estimate of organic revenue growth is 0.5% to 1.5%. (Organic growth excludes contributions made by businesses acquired within the last year.)
Both companies have been struggling to grow revenue since early 2015, when an industrywide slowdown in demand began. Investors shouldn't conclude that 3D Systems has turned the corner on this front, as the company's year-over-year revenue dropped 9.5% in the previous quarter (Q4 2016).
2. GAAP earnings per share (EPS): Tie
|
Company |
Q1 2017 Result |
|---|---|
|
3D Systems |
($0.09), up 44% from ($0.16) |
|
Stratasys |
($0.26), up 41% from ($0.44) |
Data sources: Q1 earnings reports. GAAP = generally accepted accounting principles.
We can't draw conclusions by directly comparing EPS results because the companies have a different number of shares outstanding. Neither company is profitable from a GAAP standpoint, but both narrowed their losses from the year-ago quarter. Both losses narrowed approximately the same percentage, so this category is a draw.
3. Non-GAAP or adjusted EPS: Stratasys
|
Company |
Q1 2017 Result |
|---|---|
|
3D Systems |
$0.06, up 20% from $0.05 |
|
Stratasys |
$0.05, up 400% from $0.01 |
Data sources: Q1 earnings reports.
The same comment as above applies to directly comparing the companies' adjusted EPS results. Relative to the year-ago quarter's results, however, Stratasys is the decisive winner because its adjusted EPS increased significantly more than 3D Systems' did.
Image source: Stratasys.
Cost-cutting has been the driving force behind both companies' improving EPS results over the last year or so.
4. GAAP gross profit margin: 3D Systems
|
Company |
2016 Result |
|---|---|
|
3D Systems |
51.3%, up from 50.8% |
|
Stratasys |
47.1%, down from 48.3% |
Data sources: Q1 earnings reports.
3D Systems wins this one. The two companies' enterprise businesses likely have gross margins in the same ballpark. Stratasys' overall gross margin is being dragged lower by its desktop 3D printer unit, MakerBot, which largely targets the education and hobbyist markets. (The company doesn't break out MakerBot stats anymore, but we know from past management comments that MakerBot has a lower gross margin than the company's enterprise 3D printer business.)
5. Financial strength: Stratasys
|
Company |
Q1 2017 Result |
|---|---|
|
3D Systems |
$161.7 million in cash and no long-term debt at the end of Q1; generated $19.4 million in cash from operations during the quarter. |
|
Stratasys |
$297.2 million in cash and no long-term debt at the end of Q1; generated $25.4 million in cash from operations during the quarter. |
Data sources: Q1 earnings reports.
Stratasys' cash stash is nearly double -- 84% larger to be exact -- 3D Systems' hoard. Stratasys also generated more cash from operations in the quarter. Both companies, however, remain in great shape from a liquidity standpoint.
6. Research and development (R&D) spending: Tie
|
Company |
Q1 2017 Result |
|---|---|
|
3D Systems |
$22.9 million, or 14.6% of revenue |
|
Stratasys |
$24.6 million, or 15.1% of revenue |
Data sources: Q1 earnings reports.
Stratasys' spending on R&D was slightly higher than 3D Systems' based on percentage of revenue. However, the two numbers are close enough that it seems fair to call this category a tie.
It's a necessity that both companies maintain solid R&D spending, as innovation will separate the winners from the losers in rapidly evolving tech-heavy spaces.
2017 guidance
Both companies issued 2017 guidance earlier in the year when they released their Q4 2016 results. I'm including this data, as it should be helpful, but this category isn't included in the competition, as these are only forecasts.
|
Company |
2017 Guidance |
Projected Year-Over-Year Changes |
|---|---|---|
|
3D Systems |
Revenue of $643 million-$684 million, adjusted EPS of $0.51-$0.55, and GAAP EPS of $0.02-$0.06. |
Revenue: 2% to 8%; adjusted EPS: 10% to 20%; GAAP EPS: N/A (was a loss of $0.35 in 2016). |
|
Stratasys |
Revenue of $644 million-$680 million, adjusted EPS of $0.19-$0.37, and a GAAP loss per share of $1.00 to $0.73. |
Revenue: (4.1%) to 1.1%; adjusted EPS: (32.1%) to 32.1%; GAAP EPS: 32.4% to 50.7%. |
Data sources: Q1 earnings reports.
Highlights:
- 3D Systems has the better revenue guidance.
- Stratasys' adjusted EPS guidance range is very broad, so it's not clear which company expects to show the better year-over-year improvement on this metric.
- 3D Systems expects to return to profitability on a GAAP basis in 2017. Stratasys expects to post a GAAP loss for the full year.
Image source: Getty Images.
It's a tie!
Final score: 3D Systems -- 2; Stratasys -- 2; tie -- 2. Both companies are performing quite similarly from a quarterly earnings standpoint, which should be helpful for investors to know as they make investing decisions in this space.
Keep in mind these caveats: 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. We also didn't look at stock valuations, which matter considerably.
Both 3D Systems and Stratasys got new CEOs in 2016. Moreover, 3D Systems got a new CFO last year and Stratasys got a new financial leader earlier this year. So, it's too early to tell which top management team is the better one. If you're a "bet on the jockey" investor, waiting a bit to see which team looks like it's emerging as the stronger one before investing wouldn't be a bad strategy.
