Egads. So it seems last quarter was an unmitigated disaster for companies working on the bleeding edge of Star Trek tech.
Last week, we regaled you with the tale of what happened to Motley Fool Rule Breakers favorite Stratasys
- 3D's revenues basically flatlined in the second quarter, up 0.5%.
- Gross margins declined slightly, but stringent cost controls helped to improve operating margins ("improved" in the sense that 3D lost less money).
- On the bottom line, 3D cut its net loss almost in half, to $0.15 per share.
That last point is not quite as good as it sounds: Part of the reason each share "lost" less money is that there were more shares among which to spread the losses. In other words, shareholders got hit by massive stock dilution.
The other reason for 3D's disappointing results lay in what it's been selling: lower-margin, and often resold used "Small-Frame systems and 3-D Printers." Reinforcing what we heard from Stratasys last week, 3D confirmed that these cheaper products are selling better than its more profitable Large-Frame systems, with sales by units breaking down roughly 75%/25% in favor of the cheaper models. It seems that 3D's customers, which include such marquee names as Reebok, Sony
I'll give this much to 3D CEO Abe Reichental: He didn't try to hide the bad news. Just like last quarter, he gave it to us straight. After the obligatory reference to the tough economy, Reichental tore into his own company: "we missed several ... key targets. This resulted in overall disappointing results ... well below our expectations and not enough to close the gap from the company's very anemic first-quarter revenue."
Fact is, even when Reichental sounds like he's spinning, he isn't. For example, take this assertion that backlog falling from $3.1 million six months ago to $1.1 million in Q2 was a non-event: "this lower level of backlog is consistent with the normal operating trends in its business, which are not generally dependent on backlog." Turns out, the company pretty much reported the same thing last year, when the backlog was at $1.5 million, nor did Reichental brag about the $3.1 million backlog that it had six months ago.
I have to say, unimpressed as I am with the results, I'm mightily impressed with the CEO.
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