3D Systems (DDD 4.67%) hasn't yet announced a date for the release of its fourth-quarter and full-year 2019 results, but it should be during the last week in February, or perhaps one of the first couple days in March.
The 3D printing company is approaching the report on a mixed note. Last quarter, it beat Wall Street's estimates on both the top and bottom lines. However, management provided soft fourth-quarter revenue guidance. Following the third-quarter release, shares dropped more than 3% in after-hours trading, but closed up 8.5% the next day. Apparently, investors felt more positive after they had time to digest the numbers and information shared on the earnings call.
3D Systems stock is coming back strong in 2020 after its poor showing last year. In 2019, shares declined 14%, compared to the S&P 500's 31.5% return. In 2020, they've shot up 30.7% through Jan. 22, versus the broader market's 2.9% return.
Here's what to watch in 3D Systems' report.
Image source: Getty Images.
Key quarterly numbers
Here are the year-ago quarter's results, the company's ballpark revenue outlook, and Wall Street's estimates to use as benchmarks.
| Metric | Q4 2018 Result | Company's Q4 Guidance | Wall Street's Q4 2019 Consensus | Wall Street's Projected Change (YOY) |
|---|---|---|---|---|
|
Revenue |
$180.7 million |
Roughly $161.5 million to $164.6 million* |
$163.7 million |
(9.4%) |
|
Adjusted earnings per share (EPS) |
$0.10 |
N/A |
$0.01 | (90%) |
Data sources: 3D Systems and Yahoo! Finance. YOY = year over year. *Management said it expected "mid-single-digit sequential revenue growth." The guidance range listed above represents 4% to 6% growth from the third-quarter's revenue.
Last quarter, the company's revenue declined 5.6% year over year. While that's far from the performance investors want to see, that decline was at least less steep than in the second quarter, when it was 10.9%, and in the first quarter, when it was 8.4%. However, as the table shows, analysts expect the year-over-year revenue decline to widen sequentially in the fourth quarter, to 9.4%.
What ails 3D Systems? In the second-quarter earnings release, CEO Vyomesh Joshi attributed the 2019 revenue struggles largely to the "ordering patterns of a large enterprise customer, the delay in shipping factory metals systems as we complete technical enhancements, and weaker macroeconomic conditions in some areas of our market." As for the factory metals systems, on last quarter's earnings call, Joshi said, "We are confident that we will ramp up our metal factory system solutions by the end of the first quarter of 2020."
3D printer sales
As always, a main focus should be on 3D printer sales. These sales account for about 20% of the company's total revenue, but they are much more important than that number suggests. That's because they drive sales of "consumables" -- 3D printing materials -- which sport high profit margins.
In the third quarter, revenue from sales of 3D printers fell 17.2% year over year to $30.4 million. In the earnings release, the company said the decline was driven by the "timing of large enterprise customer orders and the softer macro industrial environment." For context, in the second and first quarters, 3D printer revenue dropped 27% and 29%, respectively, year over year.
Material sales
Investors will want to see the year-over-year materials growth rate accelerate from last quarter's 2.8%, or at the very least not decelerate. While last quarter's growth rate was modest, it was notable since this metric hadn't been positive since the third quarter of 2018, when it was 2%.
Management had been strenuously asserting for some time that the materials revenue growth would resume in the second half of 2019 -- and the company came through last quarter.
Cash flows
In 2019, one of 3D Systems' main focuses was cash generation. Indeed, that's because the company has been eating into the cash on its balance sheet. Its cash hoard was still a solid $127.6 million at the end of the third quarter, but that's down from $157.3 million at the end of the first quarter.
Last quarter, 3D Systems generated $6.5 million of cash from operations, which was down from the $18.7 million it generated in the second quarter. Both those results were much better than in the first quarter, when it used $15.2 million of cash in its operations.
