Markets

Stratasys' Earnings Beat Expectations, but Revenue Falls Short

Stratasys (NASDAQ: SSYS) reported weak second-quarter 2020 results before the market open on Wednesday, Aug. 5. 

Shares of the 3D printing company closed up 0.5% on Wednesday. We can attribute the market's very muted reaction to the company turning in a "mixed report," in Wall Street lingo. Earnings beat the analyst consensus estimate, while revenue came in lighter than expected. 

Close-up of a 3D printer printing a green plastic pineapple.

Image source: Getty Images.

Stratasys' key numbers

Metric

Q2 2020

Q2 2019

Change

Revenue

$117.6 million

$163.2 million

(28%)

GAAP operating income

($29.3 million)

$0.8 million

N/A. Result flipped to negative from positive.

Adjusted operating income

($8.1 million)

$9.1 million

N/A. Result flipped to negative from positive.

GAAP net income

($28.0 million)

$1.2 million

N/A. Result flipped to negative from positive.

Adjusted net income

($7.4 million)

$8.5 million

N/A. Result flipped to negative from positive.

GAAP earnings per share (EPS)

($0.51)

$0.02

N/A. Result flipped to negative from positive.

Adjusted EPS

($0.13)

$0.16 N/A. Result flipped to negative from positive.

Data source: Stratasys. GAAP = generally accepted accounting principles.

Stratasys said the revenue decline was "primarily" due to the COVID-19 pandemic, which began hurting demand for its products and services in March. The crisis resulted in the temporary closures of many companies in its target markets, particularly those in the industrial sector

In the first quarter, the company's revenue declined 14% year over year to $132.9 million. So, sequentially, revenue fell 12%. 

For context, in the second quarter, rival 3D Systems' (NYSE: DDD) revenue dropped 29% year over year and fell 17% from the first quarter.

Wall Street was looking for Stratasys to post an adjusted loss per share of $0.20 on revenue of $121.7 million. So the company easily beat the bottom-line expectation, but missed on the top line.

The company used $9.7 million of cash from operations during the quarter and ended the period with $313 million in cash and cash equivalents. That's down just $12.5 million from the $325.5 million in cash it had at the end of the first quarter. It has no debt.

Stratasys is doing an excellent job managing costs and conserving cash during the pandemic. 

GAAP gross margin was 37.2%, down from 49.7% in the year-ago period. Adjusted gross margin landed at 45.4%, down from 52.5%.

Stratasys attributed the gross margin decline to a shift in sales mix away from consumables (which sport high profit margins) due to the pandemic. It "strongly believes that gross margins will recover as our customers return to their pre-COVID utilization levels," it said in the earnings release.

Segment results 

Segment

Q2 2020 Revenue

Change (YOY)

Product

$73.9 million

(33%)

Service

$43.7 million

(17%)

Total

$117.6 million

(28%)

Data source: Stratasys. YOY = year over year.

Within the product segment, 3D printer revenue plunged 36% year over year and consumables (print materials) revenue dropped 31%. 

What management had to say

Here's part of what CEO Yoav Zeif had to say in the earnings release:

3D printing continues to penetrate further into manufacturing across every relevant business sector. Despite the current macro slowdown due to COVID-19, we remain very optimistic about where our business and our industry is headed. The largest opportunity for us in 3D printing is in polymers, and the fastest-growing area is manufacturing. We are already a leader in polymer additive manufacturing and expect to increase our presence through new offerings that will focus on delivering incremental customer value, especially in the fast-growing manufacturing applications, where we see the longest runway.

Looking ahead

While Stratasys had a weak quarter, management is doing a great job at minimizing the pandemic's impact on its cash position. The company's balance sheet remains very strong with $313 million in cash and cash equivalents and no debt. 

Last quarter, management withdrew its full-year 2020 guidance due to uncertainties surrounding the pandemic.

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

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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