) reported first-quarter adjusted earnings (including stock-based
compensation but excluding amortization expenses, merger expenses
performance bonus and other one-time items and calculated on a
proportionate tax basis) of 30 cents, which lagged the Zacks
Consensus Estimate of 33 cents. Nonetheless, adjusted earnings
increased 3.0% on a year-over-year basis.
Stratasys' non-GAAP revenues increased 53.9% from the year-ago
quarter to $151.2 million and surpassed the Zacks Consensus
Estimate of $144 million. MakerBot's revenues were $20.6 million
for the quarter. The company witnessed improvement in the revenues
of both Products and Services segments, which resulted from robust
demand for Stratasys' higher-margin products and services.
In the reported quarter, Product revenues on a non-GAAP basis
grew 56.3% from the year-ago quarter to $129.5 million on higher
systems sales and demand for consumables. Apart from this, non-GAAP
Services revenues increased 40.9% from the year-ago quarter to
$21.7 million, attributable to an increase in revenues from
maintenance contracts and services, which reflects Stratasys'
expanding installed systems base.
During the quarter, the company shipped 8,802 units of 3D
printers and other additive manufacturing systems compared to 1,168
units sold in the year-ago quarter, primarily due to the higher
demand for MakerBot products and increased sales of PolyJet
Stratasys' adjusted gross margins (excluding amortization and
other one-time expenses and including share-based compensation)
increased 213 basis points (bps) primarily due to higher revenue
base and favorable business mix.
The company's adjusted operating expenses increased 79.1% year
over year to $76 million. Moreover, as a percentage of revenue,
operating expenses expanded 707 bps year over year. The increase
was primarily due to the MakerBot acquisition and investments in
sales, marketing and research related to product innovations.
This increase in operating expenses impacted operating margins,
which contracted 493 bps. The company reported adjusted net income
(excluding one-time items but including non-cash stock-based
compensation expenses and its related tax impact) of $15.1 million
or 30 cents compared to $11.7 million or 29 cents reported in the
The company exited the quarter with cash and cash equivalents of
$407.2 million compared to $414.1 million in the previous quarter.
Inventories for the quarter stood at $99.8 million compared to
$88.4 million reported in the previous quarter. The company does
not have any long-term debt.
The company reiterated its fiscal 2014 guidance. For fiscal
2014, the company expects its revenues to range between $660
million and $680 million while the Zacks Consensus Estimate is
pegged at $674 million. Non-GAAP earnings are anticipated in the
range of $2.15 to $2.25 per share, higher than the Zacks Consensus
Estimate of $1.79.
Management expects operating expenses related to sales &
marketing and research & development to increase in 2014 to
supplement the growing demand for Stratasys' solutions. These are
expected to impact operating margins in 2014. Also, the company
expects to incur capital expenditures in the range of $50 to $70
million on increasing its manufacturing capacity to cater to the
increasing demand for 3D solutions and printers.
Stratasys reported mixed first-quarter results wherein the top
line surpassed the Zacks Consensus Estimate but the bottom line
lagged the same. Nonetheless, year over year comparisons were
Despite the fact that a significant rise in the operating
expenses had impacted margins, yet these investments are expected
to benefit the company in the long run. The company has resorted to
strategic acquisitions to enrich its offerings. It is also worth
noting that the company reiterated its fiscal 2014 outlook as
However, the company expects expenses to rise further in fiscal
2014 for product enhancements and capacity increases to address
growth opportunities. Although these investments are expected to
impact margins in the short run, product launches and global
expansion will help the company to generate incremental sales over
the long term.
Nevertheless, Stratasys is concerned about its high-cost
business model and competition from big and small players like
3D Systems Corp.
Stratasys has a Zacks Rank #3 (Hold). Investors may also
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