3D Systems (DDD +1.06%) is slated to report its first-quarter 2020 results on Wednesday, May 6, after the market closes.
The 3D printing company had been having a challenging time trying to grow revenue before the COVID-19 pandemic, so it seems likely that its first-quarter results aren't going to be pretty.
3D Systems stock is outperforming the market in 2020 because it was up big before the coronavirus-driven market sell-off, which began in mid-February and picked up speed in March. It's down "only" 6.2% through May 4, whereas the broader market is more than 11% in the red.
Here's what to watch in 3D Systems' report.
Image source: Getty Images.
Key quarterly numbers
Here are the company's results from the year-ago period and Wall Street's consensus estimates to use as benchmarks.
| Metric | Q1 2019 Result | Wall Street's Q1 2020 Consensus Estimates | Wall Street's Projected Change (YOY) |
|---|---|---|---|
|
Revenue |
$164.7 million |
$140.6 million |
(14.6%) |
|
Adjusted earnings per share (EPS) |
($0.09) |
($0.05) |
Loss expected to narrow 44% |
Data sources: 3D Systems and Yahoo! Finance. YOY = year over year.
For context, in the fourth quarter of 2019, 3D Systems' revenue declined 8.9% year over year. And in the third quarter, it moved 5.6% lower.
Last year, CEO Vyomesh Joshi attributed the company's anemic results to weakening macroeconomic conditions in some of its markets, the ordering patterns of a large enterprise customer, and the delay in shipping its factory metals systems. Shipments were halted several quarters ago because quality issues were found. Joshi said that these systems will begin shipping again in the second quarter.
Sales of 3D printers
It may surprise many investors that 3D printer sales only account for about 20% of the company's total revenue. However, these sales are critically important because they drive future sales of materials -- and materials have high profit margins.
So focus should remain on 3D printer revenue. Last quarter, this metric fell 23% year over year, which the company attributed to the three reasons previously listed.
Sales of materials
Management came through on its assertion that materials revenue growth would resume in the second half of last year. The materials year-over-year growth rate was 2.8% and 7.3%, respectively, in the third and fourth quarters.
This growth is being driven by the company's focus on selling production 3D printers, which use more materials than machines used primarily for prototyping.
Ideally, we'd see the materials year-over-year growth rate accelerate from the fourth quarter. However, the pandemic may have squashed the company's progress on this front. Hopefully, management provides some color on this topic during the earnings call. It would be very helpful for investors to know how the first two months of the quarter stacked up to the first two months of the same quarter last year. That's a comparison that should strip out the bulk of the impact from the pandemic.
CEO search
Management will probably give an update on the CEO search. In early February, Joshi informed the board of directors that he intended to retire by the end of the year (or before then if a successor is hired sooner).
Given the chaos surrounding the pandemic, it would seem unlikely the company has made much progress on the CEO search.
