3D Systems (NYSE:DDD) released weak second-quarter 2019 results after the market close on Wednesday. 

Shares of the 3D printing company were down 6.9% in after-hours trading on Wednesday. We can probably attribute the market's initial reaction to revenue -- which dropped 11% year over year -- coming in lower than most investors were likely expecting.

The revenue decline was driven by the "ordering patterns of a large enterprise customer, the delay in shipping Factory metals systems as we complete technical enhancements and weaker macro-economic conditions in some areas of our market," CEO Vyomesh Joshi said in the earnings release.

Here's how the quarter worked out for 3D Systems and its investors.

3D Systems' key numbers

Metric Q2 2019 Q2 2018

Change (Decline)

Revenue $157.3 million $176.6 million (10.9%)
GAAP operating income ($19.2 million) ($7.7 million) N/A
GAAP net income ($23.9 million) ($8.9 million) N/A
Adjusted net income ($0.6 million) $6.2 million N/A 
GAAP earnings per share (EPS) ($0.21) ($0.08) N/A 
Adjusted EPS $0.00 $0.06 (100%)

Data source: 3D Systems. GAAP = generally accepted accounting principles.

GAAP gross margin was 46.6%, down from 48.8% in the year-ago period. Non-GAAP gross profit margin came in at 47.4%, down from 48.9% in the second quarter of last year.

During the quarter, 3D Systems generated $18.7 million of cash from operations and ended the period with $150.4 million of cash on hand. 

The company's revenue decline accelerated, as in the first quarter, its revenue fell 8.4% year over year. For context, rival Stratasys' (NASDAQ:SSYS) second-quarter revenue slipped 4.1%.

For additional context (though long-term investors shouldn't place too much weight on Wall Street's near-term estimates), analysts had been looking for an adjusted loss of $0.04 per share on revenue of $160.7 million. So, 3D Systems beat the profit consensus estimate, but fell short on the top line.

A 3D printer printing a yellow plastic object.

Image source: Getty Images.

Segment results

Segment Q2 2019 Revenue Q2 2018 Revenue Change (Decline)
Product $93.8 million $110.8 million (15.3%)
Service $63.5 million $65.8 million (3.5%)
Total $157.3 million $176.6 million (10.9%)

Data source: 3D Systems. 

Here's how key categories performed: 

  • 3D printers (within product): Revenue dropped 27% year over year to $30 million, while the number of units sold jumped 46%.
  • Healthcare solutions: Revenue fell 8% to $56.4 million. Excluding the impact of one large enterprise customer's order patterns, revenue increased 11%. (This category spans both segments and overlaps other categories.)
  • Materials (within product): Revenue fell 9% to $41.2 million.
  • Software (within product): Revenue edged down less than 1% to $25.1 million.
  • On-demand part manufacturing (within service): Revenue declined 12% to $24 million.

The decline in 3D printer revenue was driven by the "timing of a large enterprise customer's orders, our decision not to ship [direct metal printer] Factory solutions during the quarter and the softer macroeconomic industrial environment," CFO John McMullen said on the earnings call. 

For some context, in the first quarter, 3D printer revenue dropped 29% year over year on a 90% increase in the number of units sold, healthcare revenue slipped 5%, materials revenue edged down 3%, software revenue fell 8%, and on-demand manufacturing revenue declined 12%. 

What management had to say

In the earnings release, Joshi said the company continues "to see strength in customer demand for our core and new products and solutions," despite encountering the headwinds previously outlined. He added:  

I am pleased with the progress we are making on our cost structure, and we will continue to be laser focused on additional reduction opportunities in the second half of the year. We remain confident in our broad portfolio of additive capabilities, workflow solutions and overall market opportunities; and we remain keenly focused on executing on our strategy, reducing costs and driving long-term profitable growth.

Looking ahead

3D Systems turned in another anemic quarter.

The company doesn't provide guidance. However, the management team asserted several times on the earnings call that it continues to have "confidence" that year-over-year materials revenue growth will resume in the second half of this year, and specifically beginning in the third quarter. Growth in this category has an outsize positive effect on the bottom line because materials sport high profit margins.