As I look back at the last 14 months as an investor in 3D Systems (NYSE:DDD), I feel like I just got off a downhill roller coaster. In January of 2014, the stock was trading at around $97 per share, and today it’s at about $30. What is happening to one of the largest 3D printing companies on the planet? The company’s shares have lost over two-thirds of their value in just 14 months and investors remain weary, concerned and are just looking for something to cheer about.
Last quarter the company beat analysts’ expectations after lowering them the month prior with an earnings warning. A similar warning earlier this month by the company’s main competitor, Stratasys, had set the stage for a very intriguing 4th quarter report for 3D Systems this morning. Investors have been wondering if Stratasys’ recent warning may mean further doom and gloom for the entire industry, or if 3D Systems perhaps benefited from Stratasys’ current issues.
This morning they found out. Analysts had been expecting fourth quarter Non-GAAP earnings per share to come in at around $0.25. The company’s earning fell short of these expectations, as they reported Q4 Non-GAAP EPS of just $0.21. Additionally, analysts had been expecting revenues for the quarter to come in at around $202.3 million, but the company missed here as well, reporting $187.4 million. A portion of this miss could be explained by the rise of the US dollar. The company claims that a $6 million loss in revenue was caused by the foreign exchange headwinds they have faced.
While the numbers fell short of what the average analyst had expected, they did beat last year’s numbers by a wide margin. Year over year revenue was up 21%.
Business was solid in the European, Middle East and African (EMEA) regions, where the company saw 28% organic revenue growth compared to the fourth quarter of 2013. It was North America which was the disappointment, however. Here, organic revenue grew by only 7% as compared to 2013’s fourth quarter numbers.
“We are disappointed that we were not able to fully capitalize on the strength of our portfolio in all geographies equally, but are very pleased with the impressive growth rate that our EMEA channel delivered in the face of adverse foreign currency rates,” said Avi Reichental, 3DS’ President and Chief Executive Officer. “We are taking decisive steps to improve the productivity and coverage of our North American and APAC channels to the level of our EMEA region.”
Expenses for the 4th quarter rose sharply as expected, as both R&D and SG&A costs picked up. In total, expenses rose 38% as compared to last year’s fourth quarter.
“As expected, higher spending levels in support of our expansion plans pressured our earnings throughout 2014, as we fast-tracked assembly of the talent, assets and infrastructure required to take our business to the next level,” continued Reichental. “Having completed this investment phase, we expect to recover our operating leverage and expand our profitability throughout 2015.”
The remainder of the year will continue to be a bit rough, as continued capital investments and expenses prepare the company for future growth. Revenue for the second half of this year should surpass that of the first half, however. It will be interesting to watch the company as they put their plan into action over the next 12-18 months. Shares of 3D Systems are trading down about 3.1% in pre-market trading.
Are you an investor of their stock? What are your thoughts on this slight miss? Discuss in the 3D Systems 4th Quarter forum thread on 3DB.com
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