Stratasys Q1 Loss Tops $216 Million

Company reorganizing MakerBot unit amid challenges to 3D printing industry.

Stratasys Q1 Loss Tops $216 Million
The 3D printing industry has garnered lots of good ink. But at the moment, the 3D printing business is jammed. Stratasys Ltd., based in Eden Prairie and Rehovot, Israel, is one the pioneers of the 3D printing business.
But on Monday morning, Stratasys reported a first quarter net loss of $216.4 million on revenue of $172.7 million. The company’s sales reflected a 14.4 percent gain from the first quarter of 2014.
But the company’s net loss was even larger than the company had projected in its April 28th announcement of preliminary first quarter results. At that time, the company indicated that it expected revenue in the range of $171 million to $173 million and a net loss between $173 million to $208 million for the quarter.
The company’s stock has been battered. On Friday, May 8, the stock closed at $35.33 per share. The stock has dropped more than 70 percent since September 18, 2014, when the stock closed at $129.28 per share. In midday trading on Monday, the stock was actually up slightly, trading around $36 per share.
The biggest issue for Stratasys? Digesting its 2013 acquisition of MakerBot, a Brooklyn-based maker of desktop 3D printers. For the first quarter, Stratasys took a $194 million non-cash impairment charge related to the MakerBot unit.
In the company’s preliminary report, Stratasys disclosed that MakerBot revenue dropped 18 percent in the first quarter of 2015 and the company has begun a “reorganization” of the unit.
In April, Stratasys cut jobs at the MakerBot unit. While media reports estimated that approximately 100 jobs were cut, the company declined to say how many jobs were eliminated.
There have been a series of changes recently in the leadership of the MakerBot unit.

MakerBot co-founder Bre Pettis stepped down as CEO of MakerBot in September 2014. Jenny Lawton took over from Pettis as MakerBot CEO. In February, Stratasys announced that Lawton was being promoted to a job reporting directly to Stratasys CEO David Reis and that Jonathan Jaglom was being named CEO of MakerBot.
But MakerBot is not the only issue for Stratasys. The company’s preliminary report at the end of April cited several factors that are presenting challenges for the 3D printing business, including “a decline in relevant capital spending within certain regions and industries, particularly in North America.”
In the wake of the company’s preliminary first quarter results, New York-based RBC Capital Markets promptly downgraded the company’s stock and issues a report that opened with sharp words for Stratasys and the industry: “Demand drying up quicker than ink.”
The research report from RBC Capital Markets notes that the 3D printing market is proving to be bumpier than expected: “While we do think long-term this industry will sustain 20%+ revenue growth this maybe more volatile than we had expected. Finally, its unclear if the winners will be the incumbents [Stratasys, 3D Systems Corp., etc.] or the new but established entrants like HP [Hewlett-Packard], who has a better channel, distribution and customer strategy.”
But in the big picture, one analyst is still very bullish on the long-term prospects for 3D printing.
“In terms of the market for 3D printers, we still see that there are strong growth trends, particularly on a global basis. Fundamentally, the market for 3D printers is still very strong,” says Pete Basiliere, research vice president with Stamford, Connecticut-based Gartner Inc., global technology and advisory company.
One big unknown for the 3D business is what happens when traditional print manufacturer Hewlett-Packard enters the 3D fray in the fall of 2016.
“HP’s entry along with the other manufacturers of 2D printers is going to help ratify the market for a lot of potential buyers,” Basiliere tells Twin Cities Business.
Rock Hill, South Carolina-based 3D Systems Corp. is another big player in the industry. Citing an “abrupt interruption in customer demand,” the company also reported a net loss for the first quarter. Last week 3D Systems Corp. reported a net loss of $13.2 million on revenue of $160.7 million for its first quarter.
Perhaps more concerning for investors trying to gauge the health of the 3D printing industry, 3D Systems Corp. has now withdrawn its guidance for financial results for the full year: “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.”
Stratasys is forecasting revenue in the range of $800 million to $860 million for 2015. For 2014, the company reported revenue of $750.1 million. But due in large part to charges related to MakerBot, Stratasys showed a net loss of $119.5 million last year.
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