Now that both 3D Systems (DDD +3.50%) and Stratasys (SSYS +1.85%) have reported third-quarter results, we're going to compare them metric for metric. (3D Systems' results here and Stratasys' here).
Qualitative factors can be just as meaningful as quantitative ones and we're just looking at one quarter. Even with these caveats, however, our findings from this exercise should help you make investing decisions in the 3D printing space.
Image source: Getty Images.
Revenue
|
Company |
Q3 2019 Result |
|---|---|
|
3D Systems |
$155.3 million, down 5.6% from the year-ago period |
|
Stratasys | $157.5 million, down 2.8% |
Data sources: company earnings reports.
Advantage: Stratasys.
Both companies experienced revenue declines from the year-ago period, so neither is performing well. That said, Stratasys gets the win here since it performed better than 3D Systems.
GAAP earnings per share (EPS)
|
Company |
Q3 2019 Result |
|---|---|
|
3D Systems | ($0.15), down from ($0.10) in the year-ago period |
|
Stratasys | ($0.13), down from ($0.01) |
Data sources: company earnings reports. GAAP = generally accepted accounting principles.
Advantage: tie.
There's no clear winner here. Both companies had an unprofitable quarter from a GAAP basis. Moreover, both of their results moved in the wrong direction from the year-ago period.
Adjusted EPS
|
Company |
Q3 2019 Result |
|---|---|
|
3D Systems | ($0.04), down from $0.02 in the year-ago period |
|
Stratasys | $0.12, up from $0.11 |
Data sources: company earnings reports.
Advantage: Stratasys.
Stratasys takes the gold medal. Its non-GAAP, or adjusted, profit per share increased slightly from the year-ago period. Meanwhile, its rival's result not only declined, but fell into the loss category.
Image source: Stratasys.
GAAP gross margin
|
Company |
Q3 2019 Result |
|---|---|
|
3D Systems | 43.3%, down from 47.3% in the year-ago period and also lower than 46.6% in the second quarter |
|
Stratasys | 49.2%, up from 48.7% in the year-ago period, but slightly lower than 49.7% in the second quarter |
Data sources: company earnings reports.
Advantage: Stratasys.
Stratasys is the victor again. Its GAAP gross margin was nearly 6-percentage points higher than 3D Systems.' I'd venture to say that this is the widest spread between these two metrics in a long time. Moreover, Stratasys' gross margin improved from the year-ago quarter, while 3D Systems' declined.
A higher gross margin relative to a competitor often reflects better operating efficiency and/or stronger pricing power.
Liquidity -- net cash on hand and operating cash flow
|
Company |
Q3 2019 Result |
|---|---|
|
3D Systems |
$127.6 million of cash and cash equivalents. Generated $6.5 million in cash from operations in the quarter. |
|
Stratasys |
$347.1 million in cash and cash equivalents. Used $8.6 million in cash from operations in the quarter. |
Data sources: company earnings reports.
Advantage: tie.
I'm calling this category a draw. Stratasys has a much bigger cash stash than its competitor -- a big advantage when it comes to acquisitions. However, 3D Systems generated cash from its operations in the quarter, while Stratasys gobbled up some cash.
Investors shouldn't be overly concerned with Stratasys using cash in its operations, as it was a small amount relative to the company's cash position. Moreover, there appears a good reason for this dynamic. On the earnings call, CFO Lilach Payorski said that this was "primarily due to proactive steps to increase inventory levels to improve fulfillment time and support product demand as well to prepare for new product launches in 2020."
Research and development spending
|
Company |
Q3 2019 Result |
|---|---|
|
3D Systems |
$20.9 million, or 13.5% of revenue |
|
Stratasys |
$23.6 million, or 15% of revenue |
Data sources: company earnings reports.
Advantage: tie.
This category also appears a draw, as both 3D printing companies are spending a fairly similar percentage of their total revenue on R&D. Both numbers are quite respectable.
R&D spending can be considered an investment. It's particularly critical for companies in the technology space to invest in innovation. Otherwise, they could lose ground (or more ground) to competitors.
2019 guidance
|
Company |
2019 Guidance |
Projected Change (YOY) |
|---|---|---|
|
3D Systems |
Did not provide official official guidance. |
N/A |
|
Stratasys |
Revenue of $640 million to $655 million (down from previous outlook of $670 million to $700 million); adjusted EPS of $0.55-$0.70; and a GAAP loss per share of $0.31 to $0.05. |
Revenue: (3.5%) to (1%); adjusted EPS: 6% to 35%; GAAP EPS: loss widening by 41% to loss contracting by 77% from 2018's result of a loss of $0.22 per share. |
Data sources: Q4 2018 earnings reports and conference calls. YOY = year over year.
Advantage: N/A.
As was the case in 2018, 3D Systems didn't provide guidance for 2019, so a comparison isn't possible here. However, on the third-quarter earnings call, the company's new CEO, Todd Booth, provided this general outlook for Q4: "[W]e are expecting mid-single-digit sequential revenue growth." [Emphasis mine.]
The winner is... Stratasys
Score: Stratasys: 3; 3D Systems: 0; tie or N/A: 4.
Keep in mind the two caveats mentioned at the beginning of the article: Qualitative factors can be as important as quantitative ones, and we only looked at one quarter's results. Additionally, we didn't look at stock valuations.
