Stratasys reported fourth-quarter and full-year 2014 earnings results before the market opened on Monday. The headline numbers were anticlimactic. That's because on Feb. 2 the leading 3D printing company preannounced preliminary 2014 resultsthat fell short of analysts' expectations and its own guidance and issued guidance for 2015 revenue and earnings that came in below analysts' estimates.
Briefly, MakerBot was responsible for throwing a wrench into what would have otherwise been solid results in the fourth quarter. The desktop 3D-printer maker posted weak year-over-year revenue growth of 7%, and Stratasys took a $102 million goodwill impairment charge for the unit.
Our purpose here is to supplement the earnings release information with color from Stratasys' conference call. Here are five key things you should know about.
MakerBot's tepid revenue growth in Q4 was mainly due to quality issuesFrom CEO David Reis' response to an analyst's question:
Granted, companies aren't going to emphasize the negative, but the prepared opening remarks could have been more straightforward. One could get the idea that the shift in distribution methods -- just a temporary factor, so not nearly as concerning as a product quality issue -- was a strong reason for MakerBot's weak year-over-year revenue growth of 7%.
That said, MakerBot has traditionally been a well-regarded brand, and Stratasys should be able to successfully put the quality issues related to the extruders behind it.
Expect MakerBot to be a drag on results in 2015From Reis' prepared remarks:
Investors should tuck this one away, so as to not be taken off guard when MakerBot negatively affects results for the first half of 2015.
Excluding MakerBot, the gross margin drop was not due to decreasing average selling pricesFrom CFO Erez Simha'sprepared remarks (emphasis mine):
As mentioned in my earnings preview and earnings recap, the company's gross margin is an especially key metric. Simha's quote explains why the gross margin in Q4 dropped from both a year-over-year basis and sequentially from Q3. The good news is that excluding MakerBot -- it doesn't appear to be due to a decrease in product average selling prices. In fact, later in the call, Reis explicitly stated such.
Hints of new innovative platforms on the horizonFrom Reis' prepared remarks:
Reis is talking about new 3D printing platforms here, not just incremental improvements to existing ones. Various intriguing possibilities come to mind. For one, Stratasys could introduce a platform capable of producing items considerably larger than its current platforms can. As I recently wrote about, several patent applications published in 2014 suggest the company is working on such a platform.
Another possibility is that Stratasys could be working on developing a considerably faster platform. This would be especially welcome news, as speed is widely considered one of the main factors holding 3D printing back from making increased inroads into manufacturing applications. Additionally, Stratasys will surely eventually need such a platform if it wants to maintain its leadership position in the enterprise-focused 3D printing space. That's because archrival 3D Systems has been developing a high-speed, continuous platform that it has teased will be 50 times faster than comparable printers on the market. Additionally, Hewlett-Packard announced its plans last fall to bring to market an enterprise 3D printer in 2016. HP claims its 3D printer, based on its new "Multi Jet Fusion" technology, is 10 times faster than those powered by the leading extrusion-based and selective laser sintering 3D printing technologies.
Final thoughtsMakerBot's weaker-than-expected revenue and the goodwill impairment charge Stratasys took for this unit in the fourth quarter were surely disappointing. That said, MakerBot accounts for a relatively small percentage of Stratasys' total revenue -- about 12% in the fourth quarter -- and there's currently no indication that the company's core enterprise-focused business is not performing well.
The article 4 Don't-Miss Quotes From Stratasys, Ltd.'s Q4 Earnings Call originally appeared on Fool.com.
Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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