Stratasys (SSYS -0.20%) reported disappointing fourth-quarter and full-year 2019 results before the market opened on Wednesday, Feb. 28.
This was the 3D printing company's first quarterly release since new CEO Yoav Zeif took the helm, which was on Feb. 18. It had been operating without a permanent leader since June, with former board chair Elan Jaglom acting as the interim CEO.
Following the earnings release, shares fell 4.5% on Wednesday and then dropped 13.1% on Thursday, before bouncing back 5.6% on Friday. We can attribute the market's reaction on Wednesday and Thursday in part to quarterly revenue and earnings that both fell short of Wall Street consensus estimates, along with 2020 guidance on both the top and bottom lines that came in lighter than analysts had been expecting. However, a significant portion of the stock's drop is surely due to the week's overall tough market conditions stemming from the spread of the coronavirus COVID-19.
For the week, Stratasys stock lost 20.8%, and for 2020, it's 20.9% in the red. For context, the S&P 500 and tech-heavy Nasdaq indexes fell 11.5% and 10.5%, respectively, this week.
Image source: Getty Images.
Stratasys' key numbers
|
Metric |
Q4 2019 |
Q4 2018 |
Change |
|---|---|---|---|
|
Revenue |
$160.2 million |
$177.1 million |
(9.5%) |
|
GAAP operating income |
($3.3 million) |
($3.8 million) |
N/A; loss narrowed 13%. |
|
Adjusted operating income |
$10.2 million |
$12.8 million |
(20%) |
|
GAAP net income |
($2.8 million) |
$6.3 million |
N/A; result flipped to negative from positive. |
|
Adjusted net income |
$10.0 million |
$11.3 million |
(12%) |
|
GAAP earnings per share (EPS) |
($0.05) |
$0.12 |
N/A; result flipped to negative from positive. |
|
Adjusted EPS |
$0.18 |
$0.21 | (14%) |
Data source: Stratasys. GAAP = generally accepted accounting principles. EPS = earnings per share. N/A = not applicable.
Analysts were looking for adjusted EPS of $0.20 on revenue of $170.1 million. Stratasys missed on both counts.
GAAP gross margin was 49.1%, flat with the year-ago period and slightly lower than the third quarter's 49.3%. Adjusted gross margin landed at 52.4%, up from 52.2% in the year-ago period and flat with last-quarter's result.
The company used $3.4 million of cash from operations during the fourth quarter and ended the period with $321.8 million in cash and cash equivalents.
For full-year 2019, revenue slipped 4.1% to $636.1 million, GAAP net loss narrowed 10% to $0.20 per share, and adjusted EPS rose 7.7% to $0.56. The company used $11.2 million in cash from operations in 2019.
Segment results
|
Segment |
Q4 2019 Revenue |
Change (YOY) |
|---|---|---|
|
Product |
$109.0 million |
(12.5%) |
|
Service |
$51.2 million |
(2.6%) |
|
Total |
$160.2 million |
(9.5%) |
Data source: Stratasys. YOY = year over year.
Within products, 3D printer revenue plummeted 21% year over year, which CFO Lilach Payorski attributed to "continued macroeconomic weakness in Europe and Asia, as well as declines in certain legacy product lines that we expect will be more than offset by our new product introductions." Also within products, print-materials revenue slipped 3%.
For context, last quarter, 3D printer revenue declined 9%, while materials revenue increased 3%. As I wrote last quarter, "these two metrics are particularly important because sales of 3D printers drive sales of materials (and service contracts), which sport high profit margins."
What management had to say
Here's what new CEO Yoav Zeif had to say on the earnings call:
Starting in the back half of this year, we will introduce our next phase of growth with a notable step-change in our portfolio as we begin to launch a series of new products, including both manufacturing and design prototyping focused solutions. We plan to invest in the success of these new launches by increasing our go-to-market spending this year. We also expect to continue to see the steadily increasing adoption of our manufacturing-focused platforms in our target verticals of automotive, aerospace, and healthcare.
Full-year 2020 guidance
In short, Stratasys topped off a weak year with an even more anemic quarter. There was very little to like in the company's Q4 report.
Management issued the following outlook for full-year 2020:
- Revenue of $620 million to $680 million.
- GAAP net loss of $30 million to $18 million, or $0.54 to $0.33 per share.
- Adjusted net income of $25 million to $34 million, or $0.45 to $0.60 per share.
Management said on the call that the guidance ranges are wider than usual because of the uncertainty around the ongoing global industrial macroeconomic weakness, as well as the uncertainty around the potential impact of the coronavirus COVID-19.
Going into the earnings release, Wall Street had been modeling for 2020 revenue and adjusted EPS of $662.5 million and $0.63, respectively. So the company's guidance on both the top and bottom lines likely disappointed many investors.
