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3D Systems vs. Stratasys: Which Had the Better Q3 Earnings Results?

By Beth McKenna - Nov 24, 2020 at 9:00AM

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Here's how things stack up in a metric-to-metric comparison of the two 3D printing companies' third-quarter results.

Earlier this month, 3D Systems and Stratasys reported third-quarter 2020 results. (3D Systems' results here.) We're going to compare the two 3D printing companies' results metric for metric.

Keep in mind that qualitative factors can be just as important as quantitative ones and we're looking at just one quarter. Even with these caveats, however, the findings from this exercise should help you make investing decisions in the 3D printing space

A man and a woman, dressed in dark business attire, in starting positions on a running track.

Image source: Getty Images.

Revenue 

Company

Q3 2020 Result

3D Systems ( DDD -3.85% )

$135.1 million, down 13% from the year-ago period

Stratasys ( SSYS -6.56% )

$127.9 million, down 19%

Data sources: company earnings reports.

Advantage: 3D Systems.

Neither company is performing well with respect to sales. That said, 3D Systems is the winner here (or, more accurately, the lesser of the losers) because its year-over-year revenue dropped considerably less than did its competitor's. 

Both companies have been hurt by the COVID-19 pandemic. Many of their customers in the industrial sector were temporarily closed, and some are still not operating at full capacity. However, the global crisis isn't the sole culprit. Both 3D printing companies were struggling to grow revenue before the pandemic. 

GAAP earnings per share

Company

Q3 2020 Result

3D Systems

($0.61), down from ($0.15) in the year-ago period

Stratasys

($7.35), down from ($0.13)

Data sources: company earnings reports. GAAP = generally accepted accounting principles. 

Advantage: 3D Systems.

Both companies were unprofitable from a reported, or GAAP, basis. But 3D Systems wins this category because its bottom line didn't worsen nearly as much as Stratasys' did. 

Investors, however, shouldn't give this category too much weight. Both companies took goodwill impairment charges in the quarter -- and Stratasys' was much bigger. These charges, which don't involve cash, stem primarily from the pandemic's effect on the companies' businesses. 

Given the difference in the size of these impairment charges ($48.3 million, or $0.41 per share, for 3D Systems, and $386.2 million, or $7.01 per share, for Stratasys), it seems likely more impairment charges will be coming soon for 3D Systems. These companies' businesses haven't been performing that much differently. 

Adjusted EPS

Company

Q3 2020 Result

3D Systems

($0.03), up from ($0.04) in the year-ago period

Stratasys

($0.05), down from $0.12

Data sources: company earnings reports.

Advantage: Tie.

Granted, Stratasys' year-over-year result worsened, while 3D Systems' improved a bit. However, this is because 3D Systems had an easier comparable, since it performed considerably worse than Stratasys in the year-ago period. It doesn't seem fair to ding Stratasys for this fact.

I'm calling this one a tie, as the companies' adjusted net losses were in the same ballpark: $4.1 million for 3D Systems and $3 million for Stratasys. (3D Systems has more shares outstanding, which is why its adjusted loss per share is smaller even though its adjusted net loss is larger.) 

Adjusted gross margin

Company

Q3 2020 Result

3D Systems

43.5%, down from 44.4% in the year-ago period

Stratasys

46.8%, down from 52.4% 

Data sources: company earnings reports.

Advantage: Stratasys.

Stratasys easily wins this category. A higher gross margin relative to a competitor with a similar business profile often reflects stronger pricing power.

Liquidity -- operating cash flow and cash on hand 

 Company 

Q3 2020 Result

3D Systems

  • Used $11.6 million in cash in operations.
  • Ended the quarter with $75.3 million in cash and cash equivalents.
  • Has debt of $21.7 million. 

Stratasys

  • Generated $2.6 million in cash from operations.
  • Ended the quarter with $308.2 million in cash and cash equivalents.
  • Has no debt.

Data sources: company earnings reports.

Advantage: Stratasys.

Stratasys has the upper hand with respect to cash flow and liquidity. Its more robust balance sheet gives it an advantage in acquisitions and in the ability to weather tough times.

Stratasys generated cash from its operations in the quarter, while 3D Systems used cash. Moreover, Stratasys has about four times as much cash as its competitor. Finally, Stratasys has no debt, while 3D Systems has debt.

Research and development spending

Company

Q3 2020 Result

3D Systems

$18.9 million, or 14% of revenue   

Stratasys

$19.6 million, or 15.3% of revenue   

Data sources: company earnings reports.

Advantage: Tie. 

Stratasys spent more money on R&D on an absolute basis and as a percentage of revenue than did 3D Systems. However, both differences are relatively small, so this category is a draw. 

Investing in R&D is critical for companies in the technology realm. Those that don't adequately innovate often eventually get left behind.

The winner is... it's a tie 

Score: 3D Systems: 2; Stratasys: 2 tie: 2.

Keep in mind the two caveats mentioned at the top of this article: Qualitative factors can be as important as quantitative ones, and we only considered one quarter's results. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$21.23 (-3.85%) $0.85
Stratasys Ltd. Stock Quote
Stratasys Ltd.
SSYS
$24.22 (-6.56%) $-1.70

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