3D Systems (DDD 3.02%) is slated to report its fourth-quarter and full-year 2017 earnings after the market close on Wednesday, Feb. 28. Prime rival Stratasys is on deck to report on the same day, though before the market open.
Shares of 3D Systems are up 17.5% so far in 2018 through Feb. 16, but are in the red 40.7% for the one-year period through this same date. For context, the S&P 500 has returned 18.5% over the last year, while Stratasys stock is flat.
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Benchmark quarterly numbers
Here are the year-ago quarterly results to use as benchmarks.
|
Metric |
Q4 2016 Result |
|---|---|
|
Revenue |
$165.9 million |
|
Adjusted earnings per share (EPS) |
$0.15 |
Data source: 3D Systems.
For context -- though long-term investors shouldn't place too much importance on Wall Street's near-term estimates -- analysts expect 3D Systems to deliver adjusted EPS of $0.01 on revenue of $162.1 million, representing declines of 93% and 2.3%, respectively, over the year-ago quarter.
3D Systems is going into its report following a particularly tough quarter. In the third quarter, the company's year-over-year revenue dipped 2.2%, its loss per share on the basis of generally accepted accounting principles (GAAP) widened, and its per-share results adjusted for one-time factors turned negative from a positive in the year-ago quarter. Earnings were negatively affected by a $12.9 million inventory writedown associated with legacy products and parts, along with execution issues in the Americas and Asia-Pacific and pricing pressures in select businesses, notably metals and on-demand 3D printing. Moreover, the company withdrew its full-year 2017 guidance, citing the unpredictability stemming from the legacy product quality and reliability issues.
Along with the headline numbers, here's what to focus on in the report.
1. 3D printer sales
Since 2015, along with Stratasys, 3D Systems has been struggling to grow revenue from sales of 3D printers. Here's what the company's more recent 3D printer revenue picture looks like:
- Q3 2017: Decline of 11% year over year
- Q2 2017: Decline of 14%
- Q1 2017: Decline of 4%
- Full-year 2016: Decline of 21%
In 2015, the main reason for the slowdown in sales was likely overcapacity in the field due to robust 3D printer sales in the preceding few years. Increased competitive pressures are now a factor. In 2016, two compelling new entrants -- HP Inc. and venture-backed Carbon -- launched fast polymer 3D printers for the enterprise market.
Sales of 3D printers are central to 3D Systems' razor-and-blade-like business model because they drive sales of high-margin print materials, as well as maintenance contracts.
2. Figure 4 outlook
On the second-quarter earnings call, CEO Vyomesh Joshi said, "And I believe that [by] the fourth quarter, we will have revenue in the Figure 4 technology." However, on last quarter's call, he said that the company plans to launch its Figure 4 platform during the first half of 2018. So investors should't expect to see any revenue in the fourth-quarter results from Figure 4 sales. Figure 4 is a modular and scalable stereolithography (SLA) 3D printing system designed for the production of polymer parts. 3D Systems claims that it's up to 50 times faster than conventional SLA 3D printing systems, and that the underlying technology opens up a wide range of materials possibilities.
A slight pushback in the timeline is no matter. Joshi has always maintained that the "significant" revenue from Figure 4 would come in 2018. As we'll be two months into the year when its fourth-quarter results are released, investors should expect an update as to the launch and outlook. Figure 4 is extremely important to the company's long-term success. This system is 3D Systems' entry into the speedy 3D printer ranks, and meant as competition to the 3D printing systems that HP and Carbon have launched.
