Stratasys Earnings Report Lacks Transparency

Something wasn’t adding up yesterday when SSYS reported.

Steve Heller
Steve Heller
Mar 5, 2013 at 5:30PM

Surprise! Another 3-D printing company earnings report has brought on another round of investor confusion. This time, Stratasys (NASDAQ:SSYS) has been named the culprit as a result of completing its merger with Israeli 3-D printing company Objet during the reporting period. Yesterday, I wrote about how Stratasys had potentially strong organic growth, well above the 3-D printing competition, as long as the non pro forma sales figures in the report represented only its legacy business. We weren't sure if this was the case so we reached out to the company for further clarification. Now that we have the facts, it turns out things aren't much clearer.

How to smash estimates
When Stratasys reported revenues of $71.2 million versus the consensus estimate of $59.4 million, it looked like a smash hit of a quarter. As Stratasys rallied off the headline, 3D Systems (NYSE:DDD) sold off as if it was losing out big-time to one of its largest competitors. The reality of the situation is that these results not only accounted for Stratasys' legacy business, it also accounted for Objet's results since the completion of its merger on Dec. 3 of last year. In other words, these results are not in any way comparable to the past.

Them's the breaks
During the conference call, an analyst from William Blair was hoping to get to some color on how Stratasys' legacy business was faring, because, you know, his model wasn't adjusted for this inclusion. Unfortunately, Stratasys was unwilling give a final breakout of its legacy business because "the merger combined certain functions of the two companies." Going forward, I can totally relate to Stratasys's desire to be viewed as one entity, but I cannot understand why in this one instance it was reluctant to give comparable data. This is especially puzzling since one of its largest competitors, 3D Systems provides a core organic growth rate, as well as an acquisition driven growth rate. Perhaps the company wasn't pleased with the results?

A new basis
The only thing Stratasys' earnings report will be good for is providing a basis of comparison against future earnings results. If I were a Stratasys shareholder, I would find it difficult to make any judgments related to how the company is actually faring. On that note, here's to a less confusing earnings report next quarter!