It has been about a month since the last earnings report for 3D Systems (DDD). Shares have added about 7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 3D Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
3D Systems Earnings & Revenue Miss Estimates in Q1
3D Systems reported first-quarter 2022 non-GAAP loss of 6 cents per share, missing the Zacks Consensus Estimate of break-even. The bottom line compared unfavorably with the prior-year quarter’s earnings of 17 cents per share.
In the first quarter of 2022, 3D Systems reported revenues of $133 million, down 9% from the year-ago quarter and 11.9% from the previous quarter. Excluding the impact of business divestments in 2021, revenues increased 10% year over year. The top line narrowly lagged the consensus mark of $133.7 million.
Quarter in Detail
In the first quarter, product revenues represented 75.6% of the total revenues and jumped 7.4% to $100.6 million. Meanwhile, revenues from Services, which accounted for 24.4% of revenues, plunged 38.2% year over year to $32.5 million.
Revenues from the Healthcare segment fell 11.3% year over year to $64.3 million. The figure declined 13.7% from the prior quarter. Excluding the impact of business divestments, the segment’s revenues increased 4.6% year over year.
The industrial division revenues decreased 6.6% year over year to $68.7 million and 10.1% sequentially. Excluding the impact of business divestments, the unit’s revenues increased 15.7%. The company witnessed solid demand for products as well as materials.
During the first quarter of 2022, 3D Systems’ non-GAAP gross profit decreased 16.2% year over year to $53.9 million. Consequently, non-GAAP gross profit margin contracted 340 basis points (bps) to 40.6%. This decrease was driven by year-over-year product mix changes due to divestitures and increased supply chain disruptions.
Non-GAAP operating expenses increased 13% to $57.8 million. The increase was due to spending related to future growth, which includes expenses from acquisitions, research and development, and bad debt caused by heightened geopolitical events.
Non-GAAP operating loss was $3.9 million versus the year-ago operating income of $13.1 million.
Adjusted EBITDA was $1.9 million. The margin of 1.4% reflected a disciplined approach to growth, cost management and focus on core businesses.
Balance Sheet Details
The global leader in additive manufacturing solutions exited the first quarter with cash, cash equivalents and short-term investments of $745.6 million, lower than the prior-quarter’s $789.7 million. As of Mar 31, 2022, 3D Systems had a total debt of $447.5 million, down from the previous quarter’s $460 million.
During first-quarter 2022, the company utilized $15.1 million of operating cash flow.
3D Systems trimmed its full-year 2022 guidance. The company now expects revenues between $580 million and $625 million, compared with the previously expected band of $570 million to $630 million. It now projects non-GAAP gross margin to be 40-43% rather than the previously estimated 40-44%.
Non-GAAP operating expense is estimated to be $235-$250 million, raising the lower end from the earlier projection of $225-$250 million.
Management provided this guidance with the assumption that the pandemic, supply chain disruptions or any geopolitical events will not be of any concern in 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -25% due to these changes.
At this time, 3D Systems has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 3D Systems has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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