3D Printing Financials: Stratasys Revenues Up in Q4, Shares Up 156% Since Q3 Earnings

Pioneering 3D printing solutions provider Stratasys (Nasdaq: SSYS) announced better than expected fourth quarter (Q4) and full-year 2020 financial results. The company reported a net income of $11 million for Q4 on sales of $142.4 million, an 11% quarterly sequential revenue growth. Despite a better-than-expected financial report, the full-year revenue results were still down 18.1% from 2019.

Nevertheless, the recently-released numbers were a big surprise for investment analysts, evidenced by a soaring 18.2% rise in Stratasys shares just after the company announced the huge earnings beat when the market opened on March 1, 2021. The shares jumped from $34.48 to $40.74 before settling at $36.28 by market closing. Also important to note is that shares are up 156% since the last earnings report released on November 12, 2020, when the stock was trading at $14.15 per share.

Driven by increased demand from multiple sectors of the global economy, Stratasys expects additive manufacturing (AM) to enter a “meaningful, sustained trajectory of unprecedented growth in the years ahead.” The company’s CEO, Yoav Zeif, said during the Q4 2020 earning’s call that Stratasys’s unexpected positive results reflect its business model’s resilience and diversification. In fact, the Israeli-based corporation managed to deliver sequential revenue growth in the last half of 2020, amid a raging pandemic, with the last quarter producing the highest operating cash flow in almost three years.

Part 3D printed on Stratasys J55. Image courtesy of Stratasys.

Stratasys experienced an 11.34% growth in net sales between Q3 and Q4, with the most significant increase (16%) coming from the products segment. Particularly from healthcare, which Stratasys says is much stronger and already on the road to a full recovery, and in some cases even higher than initial pre-pandemic sales. This was followed by an improvement going forward in some of the company’s strongest segments: aerospace, automotive, and education.

Companies like Volkswagen are driving innovation within new vehicle design, thanks to Stratasys J850 printers. Google is weighing similar benefits for its Jacquard Wearable Platform, the first full-scale digital technology platform created for smart apparel, footwear, and other everyday consumer electronic essentials. In the aerospace sector, Boeing has recently qualified Stratasys’ PEKK-based Antero 800NA thermoplastic to use high-temperature FDM materials on flight parts. Stratasys is also diving into new product segments, like electric vehicles, which need AM technologies to produce the geometries and mechanical properties required to reduce part weight to increase the battery’s range capability (around 181 miles on average), Zeif indicated.

Jacquard by Google uses Stratasys PolyJet Technology. Image courtesy of Google/Stratasys.

2020 has been an extremely challenging year for businesses worldwide. Even though the role of 3D printing amid the widespread pandemic was one of the most talked-about topics for months, the financial impact of COVID-19-related disruptions on 3D printing companies since the start of the outbreak has been disheartening. Fortunately, the financial fragility of many startups and large corporations began to dissipate during the second half of the year, leaving room for the start of a highly awaited recovery.

Nonetheless, not everything was great news for Stratasys, as it reported total revenue of $520.8 million for the full-year financial results, compared to $636.1 million for the same period the year before. There was also a net loss in 2020 of $443.7 million, or $8.08 per share, primarily due to a $386.2 million goodwill impairment charge in the third quarter, compared to a loss of $10.8 million or $0.20 per diluted share year-over-year. Similarly, the operating loss for 2020 was $456 million, compared to $11.7 million.

Stratasys’ Antero 800NA thermoplastic produces 3D printed parts for aerospace applications. Image courtesy of Business Wire.

During Q4, operating expenses were $68.5 million, down 16.3% compared to the same period last year. This quarterly improvement was primarily due to the proactive resizing measures during the second quarter of 2020. At the time, Management indicated aggressive cost-cutting measures to reduce operating costs by $100 million per year and a workforce reduction of nearly 10%. The cost mitigation efforts were expected to help offset the impact of COVID-19. They also included a 5% salary reduction for the executive team and a four-day work-from-home week for most personnel. During the 2020 Q3 earnings call, Zeif described Stratasys had “successfully implemented all these measures to achieve its savings goal of reducing operating expenses.”

Stratasys spent approximately $6 million in severance costs, primarily in the second quarter of 2020. In conjunction with other cost-mitigation measures, the difficult resizing decision will reduce annualized operating expenses by approximately $30 million. Starting January 1, 2021, employees returned to a full-time schedule, set to carry a new associated operating expense.

These costs, plus the impact of acquisitions (including Origin and RPS) and resource allocation decisions made to help offset some of the incremental costs that support future growth engines, will result in $25 million to $30 million in incrementally higher operating costs than 2020, but still below the 2019 costs. Stratasys hopes that this strategic investment will yield material growth as the new technologies proliferate in the market, which could lead to significant operating leverage.

The future of Stratasys. Image courtesy of Stratasys.

“In 2020, we implemented a new strategy to be the first choice for polymer 3D printing, with a specific focus on expanding into fast-growing manufacturing applications. We rightsized the company and enhanced our operating model to be application-centric, allowing our team to better leverage synergies,” Zeif indicated. “Stratasys is well-positioned to grow, armed with a strong balance sheet with no debt. This year we will add three new technology platforms and will continue to prudently execute on our capital allocation strategy to meaningfully accelerate revenue, earnings, and cash flow as our investments begin to contribute in the years ahead and, in turn, drive value for our shareholders.”

As for the strategic decision to invest in the near-term and the future, the company evaluates potential investments. “We are very attractive to startups with disruptive technologies,” described Zeif. Mainly because “we have the unique ability to show the time-to-market,” an asset that is “rarely found in our industry.” Encouraged by the current quarter, which is tracking relatively similar to the first quarter of 2020, with notable positive growth in system sales, Stratasys looks forward to leaving behind the negative impact of the pandemic seen in Q1 and Q2 of 2020.