AMS Spring 2023

Stratasys’s Y2021 Near Pre-Pandemic Levels—Shares Slump Regardless

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In 2021, Stratasys (NASDAQ: SSYS) revenue reached $502.2 million, but the stock still decreased on Wednesday following the full year and fourth quarter 2021 earnings announcement. A leader in polymer 3D printing solutions, Stratasys said it delivered its highest systems sales in three years, strengthened its balance sheet, and adopted “mindful manufacturing” with plans to publish a first of its kind pure polymer additive manufacturing (AM) sustainability report in the first quarter of 2022. For the year, the company declared a loss of $62 million, or 98 cents per share, an improvement compared to $443.7 million loss, or $8.08 per share in 2020.

Following the release of the earnings report on February 23, 2022, there was a slight rise in the share price of 6.5% to $26.30 before 10 AM but then slumped 14% to $22.59 at market close. Even after hours, the stock went four cents. Since the beginning of the year, the stock dropped almost 10%, and in one year, the shares went down to $13.30.

As for quarterly earnings, the company surpassed expectations and raised its forecast for the year, following investments in technology and the largest contract in company history with a $20 million order from the US Navy for 25 F900 manufacturing systems. Fourth-quarter revenue for 2021 was $167 million, up 17.3% year over year, ahead of Zacks analyst expectations of $165.4 million. Quarterly losses amounted to $4.8 million, or $0.07 per share, while cash generated from operations was $4.4 million, compared to $23.7 million in the same period last year, reflecting higher inventory purchasing year over year.

Although the team claimed to be pleased with the end-of-year results, they did highlight a temporary setback in gross margins, which were 43.7% for the quarter, compared to 46.4% for the same period last year. The decrease in gross margin versus the prior-year period was driven mainly by raw material inflation and ongoing logistical challenges, partially offset by the impact of higher sales and sales mix. However, the headwinds caused by these external issues are expected to recede, and Zamir said he expects margins to head back over 50%.

The boost in revenue results for 2021s fourth quarter was driven by growth across all technologies and regions. Within product revenue, the systems segment, in particular, saw an increase of 26% to $61.8 million, as the brand delivered its highest systems sales since the last quarter of 2018 and is typically a driver for future consumable sales.

As for service revenue, the segment saw an increase of 13.3% compared to the same period last year, reaching $49 million. Moreover, within service revenue, there was a strong and growing contribution from healthcare, dental, and consumables, and customer service revenue was above 2019 levels.

Origin One during the printing of the clamp.

Origin One during printing. Image courtesy of Origin.

Actually, the dream of a return to 2019 revenue levels looks like it’s just around the corner as Chief Financial Officer (CFO) Eitan Zamir predicted 2022 revenue would surpass $680 million, that’s even better than 2019’s reported sales of $636.1 million. For the current quarter, revenue growth is expected to reach high-teens as a percentage over the first quarter of 2021.

“We expect to realize sequential revenue growth each quarter as we progress throughout the year with the second half of the year notably stronger than the first half. The sequential growth is somewhat different than our historical seasonality pattern, primarily due to the timing of new system releases and the corresponding ramp in sales as well as gradual shifts in sales mix,” said Zamir.

Commenting on the company’s performance in 2021, Stratasys’ CEO Yoav Zeif said they established the necessary infrastructure to drive its success thanks to strategic acquisitions, including RP Support (RPS) and Xaar 3D, along with successful product launches. For example, the company released Origin One, designed for end-user manufacturing applications, which recently began shipping; the first of its new HSeries powder bed system, the H350, powered by SAF technology and built to deliver production-level throughput of end-use part, which started shipping in December, and the F770, an FDM printer ideal for large parts, featuring the longest fully heated bill chamber on the market.

Stratasys H350 3D printer.

Stratasys H350 3D printer. Image courtesy of Stratasys.

Looking forward, Zeif expects to strengthen Stratasys’ leadership in polymer 3D printing systems in 2022, mainly driven by the H350 and Origin One. He said both products have been “well-received in the better programs” and believes this system will help to “more than double our addressable market over time.”

During the earnings call, Zaif explained that the revenue outlook for 2022 would see growth potential from verticals like manufacturing and within the healthcare universe, dental and presurgical planning in particular. In fact, for presurgical planning, in particular, Zaif suggests that Stratasys is “sitting on the best technology in the industry,” being the only company that can deliver accurate tissue imitation of anatomic models. This year the company launched a digital anatomy creator that allows surgeons or radiologists to imitate the tissue and customize it to different patients. Furthermore, Zaif considers this technology will position the firm as a leader when insurance and reimbursements start taking force in this area.

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