Stratasys (SSYS +1.65%) reported fourth-quarter and full-year 2018 results before the market opened on Thursday.
For the quarter, revenue edged down 1.2% year over year, GAAP bottom-line results flipped from negative to positive, and earnings per share (EPS) adjusted for one-time items jumped 31%.
Shares plunged to a closing loss of 13.9% on Thursday. We can attribute the market's reaction to quarterly revenue coming in lighter than many investors were probably expecting and 2019 revenue guidance also being more tepid than many probably were anticipating.
Stratasys' results: The raw numbers
|
Metric |
Q4 2018 |
Q3 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$177.1 million |
$179.3 million | (1.2%) |
|
GAAP operating income |
($3.8 million) |
($6.0 million) | N/A |
|
Adjusted operating income |
$12.8 million |
$13.5 million | (5.2%) |
|
GAAP net income |
$6.3 million |
($10 million) |
N/A |
|
Adjusted net income |
$11.3 million |
$8.4 million | 35% |
|
GAAP earnings per share (EPS) |
$0.12 |
($0.19) |
N/A |
|
Adjusted EPS |
$0.21 | $0.16 | 31% |
Data source: Stratasys. GAAP = generally accepted accounting principles.
Stratasys posted a GAAP operating loss, but turned in positive net income thanks to $12.9 million from its share in the profits of associated companies.
GAAP gross margin was 49.1%, up from 48.7% in the fourth quarter of 2017. Adjusted gross margin came in at 52.2%, down slightly from 52.5% in the year-ago period and up a tick from last quarter's 52.1%. The company generated $18.7 million in cash from operations during the quarter and ended the year with $393.2 million in cash and cash equivalents.
For some context (though investors shouldn't give too much importance to Wall Street's near-term estimates), analysts were looking for fourth-quarter adjusted EPS of $0.21 on revenue of $185.8 million. So Stratasys hit the earnings consensus on the bull's-eye, while its top line fell short of the Street's expectation.
For full-year 2018, revenue inched down nearly 1% year over year to $663.2 million, GAAP net loss narrowed 71% to $0.22 per share, and adjusted EPS grew 15.6% to $0.52. The company generated a record $63.7 million in cash from operations in 2018.
Image source: Getty Images.
Segment results
|
Segment |
Q4 2018 Revenue |
Year-Over-Year Change |
|---|---|---|
|
Product |
$124.5 million |
(4.0%) |
|
Service |
$52.6 million | 6.1% |
|
Total |
$177.1 million |
(1.2%) |
Data source: Stratasys.
The service business experienced fairly decent revenue growth, which helped to minimize the overall decline in revenue due to weak performance in products. Within products, 3D printer revenue fell 7% year over year, consumables (print materials) revenue was flat with the year-ago quarter, and customer support revenue, which mainly includes revenue from service contracts, increased 6%.
The year-over-year change in 3D printer revenue was disappointing, as this metric was flat last quarter, after declining 8.2% and 21% in the second and first quarters, respectively. 3D printer sales have an outsized importance to Stratasys' bottom line because they drive sales of print materials, which sport high margins.
Check out the latest earnings call transcript for Stratasys.
What management had to say
Here's what interim CEO Elan Jaglom had to say in the earnings release:
We are pleased with our fourth quarter and full year profitability, and finished 2018 with record cash flow from operations as we continue to build a strong operational foundation for future growth opportunities and to invest in accelerating new product introductions to expand our addressable markets. Our consolidated top line results this quarter reflect continued positive traction in high-end system and materials sales for our PolyJet and FDM technology platforms, primarily in North America, offset partially by the impact late in the quarter of the government shutdown in the United States and what we believe is temporary weakness in the Automotive sector in Europe.
Looking ahead
Stratasys' quarterly revenue was disappointing. While the company has done a decent job of increasing profitability over the last couple of years, there's only so far that improving efficiencies can take it. A sustainable turnaround will depend upon increased demand for its products and services driving solid revenue growth.
The company established full-year 2019 guidance as follows:
- Revenue of $670 million to $700 million, representing growth of 1% to 5.5% year over year.
- GAAP net loss of $0.40 to $0.22 per share, representing a widening loss of 82% to no change from 2018.
- Adjusted EPS of $0.55 to $0.70 per share, representing growth of nearly 6% to 35%.
Going into the earnings release, Wall Street was projecting 2019 adjusted EPS of $0.59 on revenue of $699.2 million. So Stratasys' revenue outlook likely contributed to the market's pushing the company's stock lower on Thursday.
"We are excited about our recent and upcoming new product introductions and believe that we will see accelerated growth beginning in 2020," Jaglom said.
