Earlier this month, 3D Systems (DDD +4.67%) and Stratasys (SSYS +1.85%) both reported first-quarter 2019 earnings (3D Systems here and Stratasys here). We're going to compare their results.
Keep in mind that qualitative factors can be just as meaningful as quantitative ones and we're just examining one quarter. Nonetheless, the findings from this metric face-off should help you make investing decisions in the 3D printing space.
Image source: Getty Images.
Revenue
|
Company |
Q1 2019 Result |
|---|---|
|
3D Systems |
$152 million, down 8.4% from the year-ago period |
|
Stratasys | $155.3 million, up 1% |
Data sources: Company earnings reports.
Advantage: Stratasys
Stratasys is the clear-cut winner here, as its revenue edged up slightly while its rival's declined considerably. Stratasys actually performed better than its results suggest. "After adjusting for the sales of our divested entities during 2018, on a like-for-like basis, total revenue was up 3% for the first quarter and 5% after also adjusting for foreign currency exchange rate changes," CFO Lilach Payorski said on the earnings call.
That said, both companies have been struggling to grow revenue over the last several years. Overcapacity in the field was likely the initial main reason, though increased competition -- particularly from HP Inc. and well-funded privately held Carbon -- has probably been the bigger reason more recently.
GAAP earnings per share (EPS)
|
Company |
Q1 2019 Result |
|---|---|
|
3D Systems | ($0.22), down from ($0.19) in the year-ago period |
|
Stratasys | ($0.04), up from ($0.24) |
Data sources: Company earnings reports. GAAP = generally accepted accounting principles.
Advantage: Stratasys.
Both companies remain unprofitable on a GAAP basis, but Stratasys is performing better than 3D Systems on this front. Its loss narrowed considerably from the first quarter of last year, while 3D Systems' widened substantially.
Stratasys' win here is a continuation of a trend. In 2018, its GAAP loss narrowed 71% from 2017, while 3D Systems' GAAP loss narrowed just 31%.
Adjusted EPS
|
Company |
Q1 2019 Result |
|---|---|
|
3D Systems | ($0.09), down from ($0.03) in the year-ago period |
|
Stratasys | $0.10, up from $0.05 |
Data sources: Company earnings reports.
Advantage: Stratasys.
Stratasys easily wins this category. Not only was it profitable on an adjusted basis in Q1, but its profitability doubled from the year-ago quarter. Conversely, 3D Systems posted a loss, and its loss widened considerably year over year.
Image source: Stratasys.
GAAP gross margin
|
Company |
Q1 2019 Result |
|---|---|
|
3D Systems | 43.2%, down from 46.9% in the year-ago period |
|
Stratasys | 49.2%, unchanged from the year-ago period |
Data sources: Company earnings reports.
Advantage: Stratasys.
Once again, Stratasys is the decisive victor. Its GAAP gross margin was a solid 600 basis points (6 percentage points) higher than 3D Systems'. Moreover, Stratasys' gross margin was steady relative to the year-ago quarter, while 3D Systems' declined.
A higher gross margin relative to a competitor can be indicative of better operating efficiency and/or better pricing power.
Liquidity -- net cash on hand and operating cash flow
|
Company |
Q1 2019 Result |
|---|---|
|
3D Systems |
$157.3 million of cash and cash equivalents. Used $15.2 million in cash from operations in the quarter. |
|
Stratasys |
$367.8 million in cash and cash equivalents. Generated $4.6 million in cash from operations in the quarter. |
Data sources: Company earnings reports.
Advantage: Stratasys.
Stratasys takes both aspects of this category: It's sitting on a much bigger pile of cash than 3D Systems and it generated cash from operations in the quarter, whereas 3D Systems' operations used cash.
Moreover, Stratasys' cash generated from operations declined from the year-ago period's $27.1 million "primarily due to timing of tax payments and proactive step to increase inventory levels in order to improve fulfillment time and support product demand," CFO Payorski said on the earnings call.
Research and development spending
|
Company |
Q1 2019 Result |
|---|---|
|
3D Systems |
$21.9 million, or 14.4% of revenue |
|
Stratasys |
$22.6 million, or 14.5% of revenue |
Data sources: Company earnings reports.
Advantage: Tie.
The two companies are spending a very similar percentage of their total revenue on R&D. Investing in innovation is crucial for companies involved in rapidly evolving technology markets.
2019 guidance
|
Company |
2019 Guidance |
Projected Year-Over-Year Changes |
|---|---|---|
|
3D Systems |
Did not provide official guidance. However, CFO John McMullen said on the Q4 2018 earnings call that the company expects "continued revenue growth, improved profitability, and cash generation" in 2019. |
N/A |
|
Stratasys |
Revenue of $670 million-$700 million; adjusted EPS of $0.55-$0.70; and a GAAP loss per share of $0.40 to $0.22. |
Revenue: 1% to 5.5%; adjusted EPS: 6% to 35%; GAAP EPS: loss widening by 82% to flat with 2018. |
Data sources: Q4 2018 earnings reports and conference calls.
Advantage: N/A
As with 2018, 3D Systems didn't provide guidance for 2019.
The winner is... Stratasys
(Cue: Queen's We Are the Champions)
Final score: Stratasys: 5; 3D Systems: 0; tie or N/A: 2.
Keep in mind the caveats mentioned in the opening: Qualitative factors can sometimes be as important as quantitative ones and we just looked at one quarter's results. Moreover, we didn't cover stock valuations.
On a related note, shares of Stratasys have gained 30.3% so far in 2019 through May 21, while shares of 3D Systems are down 14.2%. The S&P 500 has returned 15.2% over this period.
