3D Systems (DDD +0.43%) released its fourth-quarter and full-year 2017 results after the market close on Wednesday.
Investors had a good idea of what to expect for the headline numbers, as the 3D printing company on March 1 released preliminary results. It attributed the delay in filing its official results with the Securities and Exchange Commission (SEC) to uncertainties surrounding accounting procedures for revenue and costs related to its product warranties.
Shares jumped 8.2% in after-hours trading on Wednesday. It's probably safe to attribute the market's enthusiasm to the company's adjusted earnings per share (EPS) coming in at the high end and GAAP loss per share at the low end of the expected range it provided on March 1. The stock soared when the preliminary results were issued, closing up 13.1% the following day, as its forecast ranges for both revenue and adjusted EPS were considerably better than Wall Street predicted.
3D Systems' key quarterly numbers
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue (or sales) |
$177.3 million |
$165.9 million | 6.9% |
|
Operating income | ($5.7 million) | $4.1 million | N/A |
|
Net income | ($10.1 million) | $5.2 million | N/A |
|
Adjusted net income | $5.3 million | $16.7 million | (68%) |
|
GAAP earnings per share |
($0.08) |
$0.05 |
N/A |
|
Adjusted EPS |
$0.05 |
$0.15 | (67%) |
Data source: 3D Systems. GAAP = generally accepted accounting principles.
In its preliminary release, 3D Systems said it anticipated revenue in the range of $176 million to $180 million, a GAAP loss between $0.10 to $0.08 per share, and adjusted EPS from $0.03 to $0.05 per share.
Gross margin in the quarter was 48.2%, down from 50% in the year-ago quarter. Cost reduction initiatives were offset by additional investments in services and on-demand manufacturing. During the quarter, the company generated $8.2 million of cash from operations and ended the year with $136.3 million of cash on hand.
Long-term investors shouldn't place too much weight on Wall Street's near-term estimates. But for context, prior to 3D Systems releasing its preliminary results, analysts had been looking for adjusted EPS of $0.01 on revenue of $162.1 million, so the company crushed both expectations.
For full-year 2017, year-over-year revenue edged up 2% to $646.1 million. GAAP loss widened to $0.59 per share from $0.35 per share in 2016, and the company reported a loss of $0.02 per share on an adjusted basis, versus earnings of $0.46 per share in the prior year.
Image source: Getty Images.
Segment results
|
Segment |
Q4 2017 Revenue |
Q4 2016 Revenue |
Year-Over-Year Change |
|---|---|---|---|
|
Product |
$102.3 million |
$100.0 million | 2.3% |
|
Service |
$74.9 million |
$66.0 million |
13.5% |
|
Total |
$177.3 million* |
$165.9 million* | 6.9% |
Data source: 3D Systems. *Totals here add up to $177.2 million and $166.0 million, rather than the reported totals, due to rounding.
Here's how key categories performed by year-over-year revenue changes in the quarter:
- Healthcare solutions: jumped 13% to $50.4 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 a company that makes dental materials.
- Software (within product): increased 8% to $26.0 million.
- Materials (within product): climbed 8% to $42.8 million. This category also got a lift from the above-mentioned acquisition.
- On-demand part manufacturing (within service): spiked 10% to $26.5 million.
- 3D printers (within product): revenue was approximately flat at $34.9 million.
3D printer revenue coming in flat with the year-ago quarter is encouraging, as this metric has steadily declined over the last three years. It dropped 4%, 14%, and 11%, in the first, second, and third quarters of 2017, respectively, and then by 21% for full-year 2016. That said, one quarter doesn't make a trend, so it's too soon to say that this number has bottomed and is rebounding. Rival Stratasys posted 1% growth in this metric when it reported its fourth-quarter results. 3D printer sales have an outsize importance for both companies because they're central to their razor-and-blade-like business model in that they drive sales of the high-margin print materials.
What management had to say
Here's what CEO Vyomesh Joshi had to say in the press release:
We are pleased with the growth in revenue driven by healthcare, materials, software and on demand manufacturing, as well as more balanced regional execution experienced in the fourth quarter. While we still have work to do, we made significant progress last year, and we believe our investments in go-to-market combined with improved processes and better execution have started to show returns and position the company well going forward.
Looking ahead
In 2018, 3D Systems has begun launching new products with more to come, including systems based on its speedy Figure 4 technology, a lower-cost system powered by digital light processing (DLP) technology, and its next-generation platform for metal 3D printing.
The company did not provide 2018 guidance, which isn't too surprising. When it reported third-quarter 2017 results, management withdrew its previously issued full-year 2017 guidance, citing the unpredictability surrounding legacy product quality and reliability issues.
With revenue growing solidly, 3D printer revenue stabilizing, and adjusted earnings swinging back to a positive in the fourth quarter after being negative in the third quarter, there is some reason for cautious optimism that the turnaround is progressing. However, "cautious" is the keyword here, as one quarter is just one quarter, and the company didn't provide a 2018 outlook, suggesting that management doesn't have solid visibility into its prospects this year.
