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3D Systems Earnings: What to Watch

Beth McKenna, The Motley Fool

3D Systems (NYSE: DDD) is slated to report its second-quarter 2019 results after the market closes on Wednesday, Aug. 7.

Like last quarter, it will be the latter of the two leading pure-play 3D printing companies to report. Rival Stratasys (NASDAQ: SSYS) released its results on Wednesday, July 31.

Shares of 3D Systems are down nearly 17% in 2019 through Friday, Aug. 2. For context, shares of Stratasys have gained about 37% over this period, while the S&P 500 has returned just over 18%.

A big industrial 3D printer printing a red plastic object.

Image source: Getty Images.

Key numbers

Here are the year-ago quarter's results to use as benchmarks.

Metric

Q2 2018 Result

Revenue

$176.6 million

Adjusted earnings per share (EPS)

$0.06

Data sources: 3D Systems and Yahoo! Finance.

3D Systems' management has not provided any guidance. For the quarter, Wall Street expects the company to deliver an adjusted loss per share of $0.04 on revenue of $160.7 million. In other words, analysts are projecting that revenue will decline 9% year over year and that adjusted EPS will flip from positive to negative. While long-term investors shouldn't place much weight on the Street's near-term estimates, they can be helpful to keep in mind, as they often help make sense out of market reactions.

All eyes will be watching revenue closely, as year-over-year growth has decelerated over the last three quarters. Moreover, last quarter, revenue declined -- by 8.4% year over year. For context, in the second quarter, Stratasys' revenue edged down 4.1% (or 1% after adjusting for divestitures and the impact of foreign exchange) from the year-ago period, which management largely attributed to "significant economic weakness in Europe."

Sales of 3D printers and materials

Beyond the headline numbers, investors' top focus should be on 3D printer sales. Last quarter, revenue from sales of 3D printers dropped 29% year over year, while the number of units sold soared 90%. Sales of 3D printers are central to 3D Systems' razor-and-blade-like business model, in that they drive recurring sales of high-profit-margin print materials.

On that note, material sales have been weak. Last quarter, revenue from sales of materials slipped 3% year over year. And in 2018, this metric edged up 1%. On recent earnings calls, management has said that it expects the growth rate for materials to increase beginning in the second half of this year.

Cash flows

Investors should continue to monitor 3D Systems' cash flows. While the company has a solid cash position -- it ended last quarter with $157.3 million of cash on hand -- it's been struggling to generate cash from operations, let alone positive free cash flow.

In the first quarter, the company used $15.2 million of cash in operations, and in 2018, it generated only $4.8 million in cash from operations. By comparison, last year, Stratasys generated $63.7 million in cash from operations.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com