3D Systems’ 2016 First Quarter Financials Reveal Increasing Losses; High Operating Costs Remain a Problem
You don’t have to have been a fly on the wall to have heard the sigh of relief coming from 3D Systems HQ when they posted their 2015 Fourth quarter numbers in early March. Their stock prices had been circling the drain for so long, that it seemed like the embattled company had forgotten what good news sounded like. Some unexpected revenue increases and the company finally ridding itself of the financial burden of its poorly received Cube desktop 3D printer business caused a bump in stock and signaled what many believed was the start of a new era. The company signaled that they were done with the desktop market, and were getting back to what they were good at, selling and leasing commercial 3D printers to businesses.
When 3D Systems brought in former Hewlett Packard VP of Imaging and Printing Vyomesh Joshi as the new president and CEO, after a six month vacancy, it was seen as a sign that the company was starting to get serious about their shift in focus. While hiring Joshi did little to settle down the rumors that HP was still toying with the idea of buying 3D Systems, market analysts continue to brush off the idea. A much more likely scenario is that Joshi isn’t there to prime 3DS for a sale, but because his time at HP gave him a lot of experience getting companies with dysfunctional corporate cultures, tarnished reputations and ailing stock prices back on their feet.
As the release of their 2016 first quarter financials prove, Joshi has a lot of work ahead of him. Despite a slight drop, 3DS is still ringing up some pretty high operational expenses and their ongoing weak sales continue to drag them down. They actually showed larger losses at the start of 2016 than they did last year at the same time, which is impressive considering how poorly they performed throughout the entirety of 2015. Despite only being on the job for a few weeks, Joshi is undoubtedly feeling the pressure—positive, forward-thinking remarks notwithstanding.
“I’ve spent the past month listening to and learning from customers, partners and employees. I will be focusing on improving quality, reliability and supply chain. The next phase for us is to develop a strategy to drive profitable growth with operational excellence and an appropriate cost structure. I am excited to lead this company and believe we have a tremendous market opportunity,” Joshi says.
Operating expenses dropped about 2% over last year, but they still added up to a pretty bloaty $94 million. While a lot of that is being spent on R&D, about $20 million worth, 3DS is still dealing with a Frankensteined-together business structure that is made up of too many unwise or overpriced acquisitions. $74 million for SG&A expenses, even after ditching the Cube and a large round of layoffs, is still really high. While Wall Street estimated that the company’s revenue would come in at $156.3 million, it actually ended up dropping 5% to $152.6 million. Overall, 3DS is reporting a $17.8 million loss for the quarter, which works out to about 16 cents a share. Now compare that to last year’s first quarter loss of $13.2 million, or 12 cents a share, and the scope of what Joshi needs to turn around couldn’t be clearer.
It isn’t all bad news—3D Systems’ first quarter gross profit margin improved to 50.8%, up from 49.1% in 2015. The company is attributing that to their shift away from the desktop market, which remains the smartest move that they’ve made in quite a while. And while printer sales fell 24%, it drops to just 17% when the numbers are adjusted for the loss that they took on the Cube. And the company showed some significant growth in some areas that they are more than likely going to start focusing on heavily in the coming months. Revenue generated by healthcare sales increased 12%, and software sales jumped an impressive 22%.
Earnings per share were about 5 cents, which was right in line with Wall Street estimates. And after generating about $18.1 million in cash, 3DS is now sitting on a comfortable $169.8 million cash on hand as of the end of March. After reporting their financial results, 3DS stock briefly rose in premarket trading by about 1% up to $14.60; unfortunately they ended up dropping back down about 3% to $13.58 again the following day. That being said, the company is still looking at a year to date stock increase of 56%. Discuss in the 3D Systems 2016 First Quarter Earnings forum over at 3DPB.com.
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