3D Systems (DDD -2.63%) reported second-quarter 2021 results on Aug. 9 that easily beat Wall Street's expectations for both revenue and earnings. The stock soared 21.5% the next day; its 2021 gain is 163% through Tuesday, Aug. 17.
In the second quarter, the 3D printing company's revenue surged 44% year over year (59% excluding the impact of divestitures) to $162.6 million. Net loss according to generally accepted accounting principles (GAAP) narrowed 76% to $0.08 per share. Adjusted earnings per share (EPS) was $0.12, up from a loss per share of $0.13 in the year-ago period.
Below we explore one of the statements made by 3D Systems' CFO on the Q2 earnings call.
"We will have the strongest financial profile in our industry"
From CFO Jagtar Narula's remarks:
Following the completion of our divestitures in the third quarter, we will have the strongest financial profile in our industry. We will be a roughly $0.5-billion revenue [per year], profitable company with strong cash generation from operations and an outstanding balance sheet with approximately $500 million of cash and no debt. This profile is unique in our industry and positions us well to invest in exciting organic growth... We are also in an excellent position to execute on strategic growth opportunities [acquisitions].
By "profitable," the CFO probably means profitable when adjusted for one-time items, rather than on a GAAP basis. Regardless, his statement seems to hold up either way, at least with respect to publicly traded, pure-play 3D printing companies.
Examining the CFO's statement relative to Stratasys and Materialise
Stratasys (SSYS -1.33%), one of the industry's other well-established companies, has not been performing as well as 3D Systems recently on most metrics. In Q2, its operating income and net income were negative on a GAAP and adjusted basis. 3D Systems' Q2 operating income and net income were positive on an adjusted basis, but not according to GAAP.
That said, Stratasys has been performing in the same ballpark as 3D Systems with respect to operating cash flow over the last 18 months. In 2020, Stratasys performed better on this metric, while 3D Systems has the lead in 2021. In the first half of 2021, 3D Systems generated cash from operations of $42.0 million compared to Stratasys' $28.4 million.
The industry's two largest players should have similar balance sheets after 3D Systems closes on its sales of several noncore assets. 3D Systems should have cash and cash equivalents of at least $500 million once those deals close, and it has no debt. Stratasys had cash and cash equivalents of $522.7 million and no debt at the end of the second quarter.
3D Systems currently generates somewhat more revenue than Stratasys ($162.6 million vs. $147.0 million in Q2). However, that should change once 3D Systems closes on its noncore asset sales.
Belgium-based Materialise (MTLS -3.09%) is also a long-established company. It's the third largest, by revenue, of the publicly traded pure-play 3D printing companies. In Q2, its revenue was $60.3 million. For the first half of the year, it recorded a breakeven bottom-line result. It ended the second quarter with a net cash position (cash and cash equivalents minus debt) of $90.3 million. This is a nice sum for its size, but a considerably lower net cash position than Stratasys has now or that 3D Systems will have once it closes on its noncore asset sales.
That said, Materialise outshines both 3D Systems and Stratasys when it comes to consistently pumping out positive operating cash flows over the last several years.
Examining the CFO's statement relative to Desktop Metal and ExOne
All the other publicly traded pure-play 3D printing companies generate much less revenue than 3D Systems, Stratasys, and Materialise. Desktop Metal (DM -3.43%) is poised to become notably larger when it closes on its three recently announced acquisitions, including ExOne (XONE), an industrial-focused 3D printing company. However, its revenue should still be considerably lower than that of 3D Systems.
Desktop Metal (which went public last December via a special purpose acquisition company, or SPAC) and ExOne are both unprofitable and have negative operating cash flows. In Q2, Desktop and ExOne used $31 million and $7.3 million, respectively, running their operations.
Desktop and ExOne ended the second quarter with cash and cash equivalents of $514.5 million and $129.5 million, respectively. However, Desktop's cash should decline considerably by year's end, largely because the company plans to use about $192 million in cash (along with about $383 million in equity) to finance its $575 million ExOne acquisition.
This discussion doesn't include all the publicly traded pure-play 3D printing companies. Two categories of excluded companies are those that are quite small and those that haven't been publicly traded since at least the start of the year.