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3D Systems (DDD) Q2 Earnings and Revenues Top Estimates

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3D Systems Corporation (DDD - Free Report) reported non-GAAP earnings of 6 cents per share for second-quarter 2018 compared with 8 cents in the year-ago quarter. The Zacks Consensus Estimate was pegged at breakeven.

This 3D printer maker reported revenues of $176.6 million in the quarter, reflecting a year-over-year increase of 10.7%. Steady demand for the company’s healthcare, materials, software and on-demand manufacturing, along with increased printer unit sales proved conducive for the top line. Moreover, revenues beat the Zacks Consensus Estimate of $166 million.

Management notes that growth in the company’s legacy products, its go-to-market strategy and improvement in customer engagement were the key growth drivers.

The potential launch of products in second half of 2019 makes management optimistic.

Quarter Details

3D Systems’ Healthcare revenues were up 26% to $61.4 million year over year, driven by growth across all categories. Notably, the company’s on-demand manufacturing revenues were up 6% to $27.4 million, helped by its investments in facilities, customer experience and technology.

Software revenues remained flat year over year at $24.1 million. Material revenues increased 3% to $45 million. Printer revenues increased 41% and came in at $39.2 million. Meanwhile, printer unit sales surged 37% on increase in both production and professional unit sales.

Geographically, the company witnessed 6% growth in Americas and Europe and 38% in Asia Pacific. The change in management in Japan was accretive to growth.

In the reported quarter, non-GAAP gross margin contracted 170 basis points on a year-over-year basis to 48.9%. The decline was mainly due to unfavorable sales mix and increased investment in services, and on-demand manufacturing, which more than offset the cost-reduction benefits achieved from ongoing supply-chain initiatives.

In the reported quarter, the company’s non-GAAP operating expenses rose 12% to $79 million, as SG&A (up 22%) expenses rose significantly, driven by the company’s persistent investment in go-to-market, IT transformation, higher compensation cost and legal expense. Non-GAAP R&D expense declined 8% in the quarter.

3D Systems Corporation Price, Consensus and EPS Surprise

3D Systems Corporation Price, Consensus and EPS Surprise | 3D Systems Corporation Quote

Cash Flow and Balance Sheet

3D Systems ended the second quarter with cash and cash equivalents of $119.3 million, down from $126.1 million as of the previous quarter. During the quarter, the company generated $10.7 million of cash from operational activities.

Zacks Rank & Key Picks

3D Systems currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are Zillow Group (ZG - Free Report) , Science Applications (SAIC - Free Report) and Verint Systems (VRNT - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Zillow, Science Applications and Verint is projected to be 5%, 5% and 10%, respectively.

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