3D Systems (DDD 3.08%) is slated to report its third-quarter 2019 results after the market close on Wednesday, Oct. 30.
Many investors are no doubt concerned that the 3D printing company's results will be the equivalent of a Halloween Eve trick rather than a treat. Last quarter, investors sent shares plummeting 14.1% after the company's revenue fell short of Wall Street's expectations.
3D Systems stock is down 22.3% in 2019 through Friday, Oct. 11. For context, shares of rival Stratasys have gained 12.3% and the S&P 500 has returned 20.4% over this period.
Here's what to watch in 3D Systems' report.
Image source: Getty Images.
Key numbers
Here are the year-ago quarter's results and Wall Street's estimates to use as benchmarks. (3D Systems doesn't provide guidance.)
| Metric | Q3 2018 Result | Wall Street's Q3 2019 Consensus | Wall Street's Projected Change (YOY) |
|---|---|---|---|
|
Revenue |
$164.5 million |
$151.3 million |
(8%) |
|
Adjusted earnings per share (EPS) |
$0.02 |
($0.05) | N/A |
Data sources: 3D Systems and Yahoo! Finance. YOY = year over year.
Last quarter, the company's revenue decline accelerated to 10.9% year over year from a decline of 8.4% in the first quarter. In the earnings release, CEO Vyomesh Joshi attributed the drop to "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."
The first and third factors are outside 3D Systems' control. Investors can probably expect an update on the earnings call about the progress on the second item -- the status of the factory metals systems.
Sales of materials
The top management team has said several times on recent earnings calls that it's confident that year-over-year materials revenue growth will resume in the second half of this year. Well, we're here. Given the strenuousness of management's assertions, investors should be quite disappointed if this projection doesn't pan out. Materials have high profit margins, so their sales have a big effect on the company's bottom line.
Here's the recent year-over-year materials revenue change picture:
- Q2 2019: (9%) to $41.2 million (26% of total revenue)
- Q1 2019: (3%)
- Q4 2018: (2%)
- Q3 2018: 2%
Sales of 3D printers
Sales of 3D printers are critical to 3D Systems' business model in that they drive recurring sales of print materials, which sport juicy profit margins. In the second quarter, 3D printer revenue dropped 27% year over year to $30 million, while the number of units sold surged 46%.
Cash flows
Investors should watch cash flows, particularly operating cash flow. In the second quarter, the company generated $18.7 million of cash from operations and ended the period with $150.4 million of cash on hand. In the first quarter, however, it used $15.2 million of cash in its operations.
On a final note, this will be the first earnings call for 3D Systems' new CFO, Todd Booth, who joined the company on Sept. 3. He replaced John McMullen, who resigned after leading the financial team for three years.
