Seeking Alpha
Long only, deep value, growth at reasonable price
Profile| Send Message|
( followers)  

The 3D printing industry has some of the most exciting stocks at the moment, and 3D Systems (NYSE:DDD) is one of the fastest growing in the industry. The company has reported double-digit revenue growth in each of the last four quarters, which is remarkable given the current economic conditions. The revenue growth on average has been over 54% over the past four quarters. The company has been able to again show impressive growth in revenues when it reported its first quarter earnings today. As a result, the stock went up 2.90% in the pre-market. Let's take a look at the earnings.

First Quarter Earnings

Revenue for the company grew by 31% year-over-year and went up to $102.1 million. Printer sales were at the forefront of the increase in revenue, and recorded an increase of 61% during the first quarter. Whenever the revenue growth of 3D Systems has been discussed, organic growth has been an important element. Organic growth for the quarter stood at 22.1%, showing a slight improvement from the last quarter when the company reported organic growth of 22%. In my opinion, organic growth of over 20% is extremely impressive, and increased sales of printers and materials indicate that the growth will not slow any time soon.

Printer and other equipment unit sales increased by a massive 81%, which resulted in a 38% increase in gross profit and gross profit margin went up to 52.4%, 250 basis points above the previous figures. Higher volume sales were the main reason for gross profit and margin expansion, and it also indicates the company is able to manage costs. Segment wise break-up shows that Services and healthcare were both the second fastest growing segments at 18% each. The slowest growing segment was print materials, which showed only 16% growth.

3D Systems launched four new precuts during the first quarter and recorded best new product revenues compared to the last two years. New products revenue stood at $38.3 million, up 60% compared to the same quarter last year. Non-GAAP net income for the quarter went up by 43% and stood at $18.9 billion, compared to year ago value of $13.2 million. GAAP net income was $5.9 million, slightly lower than $6.2 million reported for the same quarter last year. GAAP earnings per share for the quarter stood at $0.06, compared to$0.08 per share a year ago. However, non-GAAP earnings showed an increase of 23.5% and stood at $0.21 per share, compared to the last year's value of $0.17 per share. Operating expenses as percentage of revenue have also come down from 37.1% to 35.2%.

Printers and other products are the biggest component of the total revenues at 39%, improving from 31% in 2012. As a result of massive increase in printer sales, the segment has become the biggest contributor towards total revenue. Previously the position was held by services segment, which now stands at 33%, down from 37%. Materials segment has also come down to 28% from 32% a year ago. Geographically, North America is still the biggest region for 3D systems and contributed 56% towards the total revenues, down from 59%. North Amercia's loss of share was divided between Europe (28% from 27%) and Asia-Pacific (16% from 14%).

There was also an increase of about 32% in R&D expenses and 23% in SG&A expenses. However, the net effect was positive as these expenses came down as a percentage of revenue. Cash position for 3D systems deteriorated as the company reported $110 million in cash, compared to $155 million last year.

Conclusion

Revenue growth remains strong for the company, and increased demand for printers and materials should allow the company to continue its impressive growth in revenues. In addition, 3D Systems is launching a number of new products during the current year so expect this year to be the best in terms of new product launches. Its products are getting good reception from customers. I will maintain my bullish view of 3D Systems - it has considerable upside potential. The company has one of the strongest and most diverse product portfolios, which sets it apart from its peers.

Source: 3D Systems: A Look At Earnings