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3D Systems (DDD) Q1 Loss Widens, Revenues Miss Estimates

Zacks Equity Research

3D Systems Corporation DDD incurred non-GAAP loss of 9 cents per share in first-quarter 2019, wider than the loss of 3 cents in the year-ago quarter and also the Zacks Consensus Estimate of a loss of a penny.

This 3D printer maker’s revenues logged $152 million in the quarter under review, reflecting a year-over-year decline of 8%. Moreover, the top line missed the Zacks Consensus Estimate of $166 million.

The company experienced weaker sales in on-demand manufacturing through the quarter due to business adjustments related to export compliance and outsourcing.

Further, lower demand from the automotive industry in Europe was an overhang on the quarterly results. Moreover, the company stopped shipments of the Powder Management Units in the quarter under review because of a technical issue in the same. DDD’s revenues were impacted by nearly $8 million as a result of the timing of metal printer’s shipments.

The company anticipated timing of the large enterprise customers' orders to remain a key challenge throughout the year. However, it expects printers, materials, healthcare and software to boost long-term growth.

Quarterly Details

3D Systems’ Healthcare revenues decreased 5% year over year to $50 million. Increase in Healthcare services as well as simulation revenues was offset by the impact of the timing of order from a large customer. Excluding the order of the larger enterprise customer, healthcare revenues grew nearly 18%. Management remains optimistic about overall demand trends for healthcare including the company’s NextDent 5100 3D printer.

The company’s on-demand manufacturing revenues were down 12% to $22.6 million. Headwinds related to export compliance and outsourcing changes are dampeners. Softness in demand from automotive customers in Europe was also a downside.

Printer unit sales soared 90% but Printer revenues dropped 29% to $28 million due to the mix of unit selling prices. The company anticipates printer unit sales, revenue mix and the overall average selling price to continue fluctuating as the company ramps up sales with new products at prices ranging from $5,000 to more than $1 million.

Software revenues fell 8% year over year to $20.8 million due to lower Cimatron product revenues. Material revenues dipped 3% to $41.4 million due to a faster-than-expected deterioration in legacy materials. The company expects revival of materials growth during the second half of 2019.

3D Systems Corporation Price, Consensus and EPS Surprise

3D Systems Corporation Price, Consensus and EPS Surprise | 3D Systems Corporation Quote

Margins

In the reported quarter, non-GAAP gross margin contracted 290 basis points on a year-over-year basis to 44.2%.

In the quarter under consideration, the company’s non-GAAP operating expenses improved 8% to $72.9 million. Non-GAAP SG&A was down 5% and non-GAAP R&D expense was lower 15% in the quarter under consideration.

Cash Flow and Balance Sheet

3D Systems ended the first quarter with cash and cash equivalents of nearly $157.3 million compared with $110 million in the sequential quarter.

The company used $15.2 million of cash in operational activities during the first quarter as compared to $7.7 million of cash generated sequentially.

Zacks Rank and Stocks to Consider

DDD currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Computer and Technology sector are Cadence Design Systems CDNS, ACI Worldwide, Inc. ACIW and Avid Technology, Inc. AVID, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Cadence, ACI Worldwide and Avid is projected at 12%, 12% and 10%, respectively.

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