By Vikas Shukla
Stratasys Ltd. (NASDAQ:SSYS) announced that it has completed the acquisition of Solid Concepts. On April 2, the 3D printing company reached deals to buy Solid Concepts and Harvest Technologies. Solid Concepts is the largest additive manufacturing service bureau in North America. It was also a partner to Stratasys' RedEye unit. In fact, the company plans to combine both acquisitions with RedEye to create a large additive manufacturing service division. The Harvest Technologies transaction is yet to be completed.
Stratasys combines Solid Concepts with its RedEye unit
Stratasys has stated that the transactions will be accretive to the company's non-GAAP earnings within first 12 months after closing. The Minneapolis-based company said that Solid Concepts generated about $65 million in revenues in FY2013. Stratasys will also update its full year guidance during the second quarter earnings announcement.
Goldman Sachs analyst Samuel H. Eiser said in a research note that he expected Solid Concepts to add about $30 million to the company's FY2014 revenue, assuming no growth in the target company's business. Stratasys' RedEye unit is expected to grow 26% this year, while 3D Systems' (NYSE:DDD) QuickParts business is expected to grow 27%. So, it's safe to assume 25% growth in Solid Concepts' business. On that basis, the acquisition could easily add $30-$40 million to Stratasys' 2014 revenues.
Solid Concepts deal a positive for Stratasys
Goldman Sachs believes the Solid Concepts' acquisition is a positive for Stratasys. On the company's Q2 earnings call, investors are likely to be focused on the impact of this integration and profitability expectations. The company also is expected to update investors on the Harvest Technologies transaction, which is yet to be closed. Though Eisner expects Service gross margins to come in at 46%, Solid Concepts' gross margins are likely to be lower as service bureaus have relatively lower margins.
Goldman Sachs has a $137 price target on the stock. On April 7, Stratasys also announced the acquisition of Interfacial Solutions, a thermoplastics R&D and production services company. Wisconsin-based Interfacial has long been a production partner of Stratasys.