Stratasys (NASDAQ:SSYS) reported first-quarter 2018 earnings before the market opened on Wednesday. Revenue declined 5.8% year over year, loss per share narrowed to $0.24, from $0.26, and adjusted earnings per share came in flat at $0.05. 

Management attributed the weak revenue performance -- which hurt the bottom line -- to "underperformance in North America related to high-end 3D printing system orders, specifically from customers in government and other key verticals such as aerospace and automotive."

Shares plummeted to a closing loss of 10.1% on Wednesday. We can attribute the market's reaction to both revenue and adjusted earnings coming in weaker than most investors were likely expecting.  

Stratasys' results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$153.8 million

$163.2 million


GAAP operating income

($6.5 million)

($12.6 million)


Adjusted operating income

$4.9 million

$4.0 million


GAAP net income

($13.0 million)

($13.9 million)


Adjusted net income

$2.7 million

$2.4  million


GAAP earnings per share (EPS)




Adjusted EPS


$0.05 --

Data source: Stratasys. GAAP = generally accepted accounting principles. 

GAAP gross margin was 49.2%, up from 47.1% in the year-ago period. Adjusted gross margin was 52.8%, up from 51.2%. Stratasys generated $27.1 million in cash from operations and ended the period with $346.5 million in cash and cash equivalents. 

For some context -- though investors shouldn't pay too much attention to Wall Street's near-term estimates -- analysts were looking for adjusted EPS of $0.08 on revenue of $167.5 million. So Stratasys fell short on both the top and bottom lines.

3D printer

Image source: Getty Images.

Segment results 


Q1 2018 Revenue

 Q1 2017 Revenue

Year-Over-Year Change


$103.9 million

$115.1 million



$49.9 million

$48.1 million



$153.8 million

$163.2 million


Data source: Stratasys. 

Within products, 3D printer revenue dropped 21% year over year; consumables (print materials) revenue grew 2%; and customer support revenue, which mainly includes revenue from service contracts, increased 7%.

The 3D printer sales are crucial to Stratasys' razor-and-blade business model in that they drive sales of the high-margin print materials, as well as service contracts. So the big decline in 3D printer revenue is disappointing. However, management does not believe the first quarter's revenue results represent a fundamental change in the demand environment in North America.

What happened with Stratasys in the quarter and recently?

  • At the RAPID + TCT trade show, the company announced and showcased multiple new and improved products. These include several enhancements to its PolyJet portfolio for prototyping applications, and new materials offerings, certification solutions, and software capabilities for manufacturing applications.

  • It began collaborating with Eckhart Inc. to advance the adoption of 3D printing for factory tooling in North America. Eckhart is using Stratasys' FDM technology and advanced materials.

  • The company's recently launched J700 Dental 3D printer was adopted for production applications by leading dental labs, including DynaFlex and Ortoplus.
  • At RAPID + TCT, the company provided further details regarding its new metal 3D printing platform for manufacturing applications, which it announced last quarter. Stratasys says the platform, which incorporates the company's proprietary jetting technology, results in an 80% reduction in cost per part for aluminum components compared to other 3D printing technologies. The company is starting with aluminum, but plans to expand to include other metal capabilities.

What management had to say

Here's what Stratasys CEO Ilan Levin had to say in the press release:

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.

Looking ahead

Stratasys had a subpar quarter. It turned in weak revenue results, but did manage to slightly narrow its GAAP loss per share. Sales of high-end systems can be lumpy on a quarterly basis, so it's possible timing was an issue here, but we won't know for sure until the next couple of quarters play out. 

Despite the weak quarter, management remains confident the company can achieve the guidance it issued last quarter. It reiterated its outlook, which is as follows:


2018 Guidance

2017 Result

Projected Year-Over-Year Change


$670 million to $700 million 

$668.4 million

Approximately flat to 4.7%


($0.75) to ($0.46) 


Flat to loss narrowing by $0.29

Adjusted EPS

$0.30 to $0.50


(33%) to 11%

Data source: Stratasys.

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