3D Systems Corporation announced its financial results for the first quarter of 2015.
For the quarter ended March 31, 2015, the company reported revenue of $160.7 million, an increase of 9% over the comparable quarter in 2014, or a 17% increase on a constant currency basis. The company reported a GAAP loss of $0.12 per share and non-GAAP earnings of $0.05 per share.
The company believes that negative currency headwinds and demand weakness attributed to several other macroeconomic factors resulted in lower than expected purchases of its 3D printers and materials by aerospace, automotive and healthcare customers during the quarter. Furthermore, the company reported that certain metal and nylon applications and performance issues delayed its ability to sell additional printers during the first quarter of 2015. Combined, these factors reduced sales of the company's design and manufacturing printers and materials and resulted in a decline in organic revenue of 7% compared to total revenue in the first quarter of 2014.
"We were surprised and disappointed by the abrupt interruption in customer demand late in the quarter from several economic factors that we believe caused many of our customers to defer their planned investments," said Avi Reichental, President and Chief Executive Officer, 3DS. "However, we believe the fundamentals of our business model and the strength of our portfolio are intact, and we are encouraged to see certain OEMs resuming purchasing activities they deferred during the first quarter."
First Quarter Revenue Highlights (compared to first quarter 2014)
- Direct metals printers revenue increased 39% on a 46% increase in units sold
- Healthcare revenue increased 38% despite delayed purchases of 3D printers
- Consumer revenue grew 65% on a 169% increase in consumer printers sold
- Services revenue increased 31%, driven by healthcare and software services
The aforementioned factors held EMEA revenue growth to only 2% over the first quarter of the previous year, and compressed APAC revenue 20% from the comparable quarter, primarily on weaker Japanese demand. Revenue from the Americas increased 27% over the first quarter 2014 on rising demand for the company's expanding products and services.
"We are pleased that several of our categories and verticals continued to perform well, despite the acute investment pause by customers that we experienced towards the end of the first quarter," continued Reichental.
For the first quarter of 2015, gross profit margin increased sequentially to 49.1%, despite drag from lower revenue and adverse rate and mix within categories. The company used $0.9 million of cash in operations during the quarter and had $199.9 million of cash at the end of March, after paying $78 million for the acquisition of Cimatron.
First quarter operating expenses increased 46% from the prior year's quarter to $97 million, including a 52% increase in SG&A costs and a 29% increase in R&D expenses. Cash operating expenses increased 10% sequentially, primarily from acquisitions.
The company reported a GAAP net loss of $13.2 million, or $0.12 loss per share, and non-GAAP net income of $5.2 million, or $0.05 earnings per share, for the first quarter of 2015.
Business Highlights
Following a period of stepped-up investments, the company has shifted its focus to fine-tuning and leveraging its comprehensive portfolio of products and services in 3D digital fabrication. Thus far, the company:
- Continued construction of its new 70,000 square foot healthcare facility in Littleton, CO, to support its expanding portfolio and increasing demand for its personalized healthcare products and services;
- Completed the installation and startup of its continuous, high-speed 3D printer in its Wilsonville, OR facility and is working with customers to qualify next generation manufacturing applications for the platform;
- Progressed on its various channel productivity and coverage initiatives; and Expanded its fleet of Quickparts direct metal and selective laser sintering 3D printers.
- During 2015, the company continued to add synergistic technology, domain expertise and complementary sales channels through its strategic investments, including:
- Completing the acquisition of Cimatron in February 2015, strengthening the company's 3D digital design and fabrication portfolio; and
- Acquiring Easyway, providing the company with a strong platform to scale its custom manufacturing operations and multiplex its 3D printing reseller coverage within China.
Management believes that its ongoing investments are sufficient to support its growth plans and expects to keep its 2015 capital expenditures to approximately $25 million. The company plans to substantially moderate its M&A activities for the remainder of this year as it has shifted its focus towards leveraging recently acquired assets that it expects will result in operating expense reductions in the second half of 2015.
"While current conditions may indicate an industry-level pause, we are pleased to note that several weeks into the second quarter, our bookings are ahead of the same period in the first quarter," continued Reichental.
2015 Guidance
Given marketplace uncertainties, management believes it is prudent at this time to withdraw the company's previously issued annual guidance for 2015. Management continues to rigorously assess the macroeconomic environment and customer demand and plans to provide an update regarding guidance when management has more clarity that sector conditions have stabilized.
"While the current economic climate interfered with our planned cadence for 2015, we believe that the fundamentals of our business and the strength of our portfolio are intact. We remain optimistic about the market opportunities ahead and are fast tracking our planned integration, productivity and efficiency measures without impairing future growth," concluded Reichental.
