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3D Systems (DDD) Q4 Earnings Beat Estimates, Revenues Up Y/Y

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3D Systems Corporation’s DDD adjusted earnings came in at 5 cents per share, down 66.7% from the prior-year tally of 15 cents per share. However, the figure came in above the Zacks Consensus Estimate of 1 cent. Increase in total operating expenses, on account of rise in selling, general and administrative, as well as research and development costs, put pressure on the bottom line.

The company reported a GAAP loss of 8 cents per share in fourth-quarter 2017, which is in sharp contrast to earnings of 5 cents per share reported in the prior-year quarter.

For full-year 2017, 3D Systems incurred an adjusted loss of 2 cents per share against adjusted earnings of 46 cents per share in 2016.

Inside the Headlines

The 3D printer maker reported revenues of $177.3 million in the quarter, reflecting a year-over-year increase of 6.9%. Steady demand for the company’s healthcare, materials, software and on-demand manufacturing, along with increased printer unit sales proved favorable for the top line. Moreover, revenues came ahead of the Zacks Consensus Estimate of $164 million.

For full-year 2017, 3D Systems generated revenues of $646.1 million, up 2.1% from the prior-year’s tally of $633 million.

3D Systems’ Healthcare revenues were up 13% to $50.4 million year over year, driven by growth across all categories. Notably, the company’s on-demand manufacturing revenues were up 10% to $26.5 million, helped by its investments in facilities, customer experience and technology. For full-year 2017, healthcare revenues experienced an increase of 18% to $188.7 million.

Software revenues were up 8% to $26 million compared with the prior-year quarter. Material revenues rose 8% to $42.8 million, driven by continued utilization of its installed base and strong contribution from the previously acquired Vertex-Global. For full-year 2017, material revenues experienced an increase of 8% to $168.8 million.

Printer revenues were almost flat compared with the prior-year quarter and came in at $34.9 million. Meanwhile, printer unit sales increased 15% owing to increase in both production as well as professional unit sales.

3D Systems Corporation Price, Consensus and EPS Surprise


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


In the reported quarter, gross margin contracted 180 basis points on a year-over-year basis to 48.2%, due to the adverse impact from product discontinuations and legacy inventory cleanup charges.

In the reported quarter, the company’s operating expenses increased 15.7% to $91.2 million, as SG&A (up 18%) expenses rose significantly, driven by the company’s persistent investment in go-to-market and IT transformation. R&D expense (up 9%) also increased to $23 million.

Notable Developments

Recently, 3D Systems launched the NextDent 5100, a 3D printer designed for dental labs. The company also rolled out a number of new materials for the NextDent 5100. Moreover, the company launched the FabPro 1000, a low cost high productivity DLP based 3D printers, designed for high functionality industrial prototyping, dental and jewelry production.

Going forward, the company plans to commence shipping its next-generation SLS printer, the ProX SLS 6100. Other plans in the pipeline include the introduction of additional Figure 4 products and the DMP 8500, an automated and fully integrated next generation metals platform.

Cash Flow and Balance Sheet

3D Systems ended the quarter with cash and cash equivalents of $136.3 million, down significantly from $184.9 million as of Dec 31, 2016. At the end of December, net cash generated from operating activities came in at $25.9 million, significantly lower than the year-earlier figure of $57.5 million.

To Conclude

Of late, this Zacks Rank #3 (Hold) company has been benefiting from favorable 3D printing industry fundamentals, led by rising demand for diverse applications of this novel technology across multiple domains. Moving ahead, strong demand for production printers, materials and software, as well as healthcare solutions will likely act as major catalysts for growth. We also believe that the acquisition of Vertex-Global Holding B.V. will unlock multiple opportunities for the company.

However, over the past few quarters, revenues from 3D printing products and services have been significantly undermined due to sustained challenging market conditions that adversely impacted customers' capital investment cycles and reduced demand across most geographies. If these problems persist, the company’s performance might come under pressure, moving ahead.

Stocks to Consider

A few better-ranked stocks in the same space include DST Systems, Inc. DST, Applied Materials, Inc. AMAT and ASML Holding N.V. ASML. While DST Systems sports a Zacks Rank #1 (Strong Buy), Applied Materials and ASML Holding carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DST Systems has a decent earnings surprise history, surpassing estimates thrice in the trailing four quarters, with an average of 12%.

Applied Materials has an impressive earnings surprise history, exceeding estimates in the trailing four quarters, with an average of 4.8%.

ASML Holding has posted earnings beat in the trailing four quarters. It boasts an average beat of 18.8%.

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