Sweden-based metals 3-D printing company Arcam (NASDAQOTH: AMAVF) reported its fourth-quarter and full-year 2013 earnings on Friday morning, Central European Time. Arcam, which sells its electron beam melting 3-D printing systems to the orthopedic implant and aerospace industries, was the first company in the 3-D printing sector to report official (rather than just preliminary) results for these periods.

Investors in Sweden clearly didn't like the results, as they drove the price of the stock, which is listed on the Stockholm exchange, down 7.5% on six times its average trading volume. However, investors in the United States -- Arcam's stock also trades over the counter in the U.S. -- had a more measured initial take on Arcam's results, as the stock was in the red just 1.6% when the market closed out the trading day.

Arcam's earnings: a mixed bag
The disparity in initial takes on Arcam's earnings isn't surprising -- its results were largely a mixed bag and depend upon how one looks at them. First, here are the highlights:  


  • Revenue increased 7% to 66.9 MSEK (million Swedish Krona)
  • Net income decreased 45% to 7.6 MSEK
  • Earnings per share decreased 51% to 1.81 SEK
  • Nine electron beam melting systems were delivered, versus eight in the year-ago period
  • 10 EBM systems were ordered, versus 12 in the year-ago period

Full-year 2013 

  • Revenue increased 43% to 199.4 MSEK (135.2 MSEK systems, 64.2 MSEK aftermarket -- materials and service)
  • Operating income was flat at 14.5 MSEK
  • Net income increased 2.7% to 15.4 MSEK
  • Adjusted net income (excludes 5 MSEK in non-recurring costs, primarily alliance and acquisition-related costs) rose 36% to 20.4 MSEK
  • EPS decreased 4.7% to 3.85 SEK
  • 25 EBM systems were delivered during the period, versus 15 in 2012
  • 27 EBM systems were ordered, versus 24 in 2012
  • 12 EBM systems were on backlog at end of year, versus 10 in 2012 
  • Allied with orthopedic implant manufacturer DiSanto Technology
  • Announced acquisition of metal powder manufacturer AP&C
I've converted the following Swedish currency to U.S. dollars using the exchange rate on Dec. 31 (1 USD = 6.433 SEK). The fourth-quarter numbers should be exact. However, be aware that the annual numbers will be a little off because we're applying the year-end exchange rate to the entire year's results, rather than converting each quarter's numbers, and then adding the quarterly numbers.

Quarterly (converted to USD)
  • Revenue was $10.40 million
  • EPS were $0.28
Full-year 2013 (converted to USD)
  • Revenue was $31.0 million 
  • EPS were $0.60  

As you can see, the quarterly results are disappointing when compared with last year's results. That said, they're still quite impressive on a relative basis compared with the other 3-D printing companies, as Arcam remains profitable. 3D Systems is the only other 3-D printing company that's profitable on a non-adjusted, or GAAP, basis. More importantly, Arcam's a small company that sells pricey machines, so quarterly revenue should be expected to be "lumpy" for some time.

Full-year 2013 results are solid, with revenue and adjusted net income up 43% and 36%, respectively. Granted, 43% annual revenue growth isn't as torrid as some of the growth numbers other 3-D printing companies have been posting. However, keep in mind that Arcam's growth has been entirely organic. (This will change somewhat going forward, as Arcam's acquisition of metal powder manufacturer AP&C is scheduled to close in the first quarter.)

Net profit margin is a respectable 7.7%, though down from 10.8% in 2012. On an adjusted basis, Arcam's profit margin is 10.2%.

The order intake and backlog numbers are a bit concerning. Only three more 3-D printing systems were ordered in 2013 than in 2012. This represents about a 13% increase, which is low, given the 20%-plus growth rate of the overall 3-D printing sector. Additionally, the company noted that three of the 27 will definitely be delivered after 2014. 

Arcam's playing a different game than 3D Systems and Stratasys
It's important to remember Arcam is not engaged in the same growth strategy as the leading 3-D printing companies, 3D Systems and Stratasys. 

Sure, the company is interested in growth, as its alliance with DiSanto Technologies, which involves an option to buy DiSanto, and acquisition of a metal power manufacturer, attest. However, Arcam's not engaged in the same hyper-growth strategy that the two leading companies, most especially 3D Systems, are engaged in. (Stratasys' growth had been more measured, but its announcement last month that it plans to turbocharge its R&D and marketing efforts means it's upping its growth game, no doubt to stay competitive with 3D Systems.)

3D Systems, most especially, is taking a page from Amazon.com's game plan: sacrifice short-term profits to spend on activities intended to fuel long-term growth and capture market share. The pertinent question, of course is: Will this game plan work, or will it result in a race to the bottom on margins across the sector?

Arcam's a very small company in comparison with 3D Systems and Stratasys. Its market cap is $717 million, versus 3D Systems' $6.8 billion and Stratasys' $5.6 billion. So, even if it wanted to, it wouldn't be able to afford to go on acquisition sprees and partner left and right with diverse companies.

Whether you view Arcam's relatively measured, organic growth positively or negatively depends upon the type of investor you are.

Foolish final thoughts
There's much to currently like about Arcam -- namely, it's a profitable company in a largely unprofitable or barely profitable sector, it's growing relatively moderately, and it occupies an attractive niche.

Investors and potential investors, however, need to keep an eye on the order intake situation. A slowing could signal that one or both of Arcam's two markets (orthopedic implants and aerospace) are favoring other metals 3-D printing technologies over Arcam's EBM technology.

Look for another article soon on Arcam's Fast EBM project and notable collaborations.