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3D Systems Q1 Adjusted Loss Narrows, Guidance Withdrawn - Analyst Blog

3D Systems CorporationDDD reported first-quarter 2015 non-GAAP earnings of 5 cents per share, down 66.6% from the prior-year tally of 15 cents. Adjusted loss (including stock-based compensation) came in at a penny per share, exceeding the Zacks Consensus Estimate of a loss of 2 cents.

3D Systems Corporation - Earnings Surprise | FindTheCompany

On a GAAP basis, loss for the quarter was 12 cents per share, plummeting from earnings of 5 cents a share in the prior-year quarter.

Strong currency headwinds, coupled with volatile macroeconomic conditions, caused the demand for 3D printers to plummet, adversely affecting the bottom-line performance. Key customers from aerospace, automotive and healthcare business reduced their spending and negatively impacted earnings.

Quarter Details

The 3D printer maker reported quarterly revenues of $160.7 million, reflecting a year-over-year increase of 8.8% considering the impact of currency headwinds, and up 17% on a constant currency basis. However, revenues fell short of the Zacks Consensus Estimate of $166 million.

The top-line growth was attributable to improvement in the Direct Metals and Healthcare business line, registering year-over-year revenue growth of 39% and 38%, respectively. Also, 65% revenue growth in the Consumer product line and 31% revenue growth in Services have driven the top line. In the Services segment, healthcare & software services emerged as the clear winners and higher volume of consumer printers sold contributed to the growth of consumer segment.

On a geographic basis, the EMEA region, comprising Europe, the Middle East & Africa, witnessed organic growth of 2% year over year. Moreover, weak demand from Japan primarily led revenues of the Asia Pacific region to decline 20% on a year-over-year basis. However, Americas recorded a 27% year-over-year increase in revenues for the first quarter.

Gross margin for the reported quarter stood at 49.1%, down from the previous-year tally of 51%. Also, the company's selling and administrative expense was up 52% to $74.3 million, while research and development expenses rose 29% to $22.2 million.

Quarter Highs

Despite a challenging quarter, the company continues to focus on development of products and services in 3D digital fabrication. In this regard, it has completed the construction of a 70,000-square feet healthcare facility in Littleton, in order to meet the surging demand for its personalized healthcare products and services.

Also, the company has expanded its Quickparts direct metal and selective laser sintering 3D printer product line for increasing market share. Finally, in order to gear up for next-generation manufacturing applications, the company has completed the installation of high-speed 3D printer in Wilsonville.

Acquisitions

In the reported quarter, the company has completed the acquisition of Cimatron and Easyway. The former is expected to strengthen the company's 3D digital design and fabrication portfolio, while the latter will likely improve its business prospects in China.

Cash Flow and Balance Sheet

3D Systems ended the quarter with cash and cash equivalents of $199.9 million compared with $284.9 million as on Dec 31, 2014. Cash utilized in operating activities was $937 million for the quarter compared with a cash flow of $308 million from operating activities in the prior year.

Outlook

Taking into account the current market uncertainties, the company has withdrawn its previous earnings and revenue guidance for 2015. Management continues to assess broader geopolitical environment and customer demand, and will reissue guidance with better macroeconomic clarity.

Management is optimistic about the future considering the strength of the company's portfolio. Going forward, the company expects market conditions to become more favorable, thereby allowing growth.

To Conclude

There is no denying the fact that 3D Systems experienced a challenging quarter mainly due to broader market conditions. However, backed by the recent acquisitions and satisfactory order levels in the second quarter, the company expects to deliver better results, going ahead.

3D Systems presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the technology sector include Cirrus Logic Inc. CRUS , Semiconductor Manufacturing International Corp. SMI and Silicon Motion Technology Corp. SIMO , each sporting a Zack Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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