Stratasys’ 3D Printing Jam

Stratasys keeps growing amid industry “pause.”

After losing money last year and in its first quarter of 2015, Stratasys Ltd. this month will reveal whether it has solved a recent stretch of acquisition-related operating troubles.

Fact 1


Recent Acquisitions

April 2014
Announces deals to buy two companies, Solid Concepts Inc. and Harvest Technologies. Stratasys says the Solid Concepts deal could cost up to $295 million.
September 2014
Announces its acquisition of GrabCAD Inc.
November 2014
Discloses deal to acquire startup software company Layer By Layer.
July 2015
Unveils deal to acquire Germany-based RTC Rapid Technologies.


Climbing Revenue, Mounting Losses

Revenue: $117.1 million
Net income: $9.4 million
Revenue: $155.9 million
Net income: $20.6 million
Revenue: $215.2 million
Net income: $8.8 million
Revenue: $484.4 million
Net loss: (-$26.9 million)
Revenue: $750.1 million
Net loss: (-$119.5 million)


Source: Stratasys Ltd.


There’s some hope that the worst is over for the manufacturer of 3-D printers and printing systems. In early May it reported a net loss of $216.4 million on revenue of $172.7 million for the first quarter. That loss accounts for at least 84 percent of the amount Stratasys expects to lose this year—indicating the next three quarters should yield lower losses and possibly profits once again.

“I think one of the main concerns is if that guidance can be maintained. I would be surprised if it can be maintained,” says Bobby Burleson, a managing director for the Toronto-based Canaccord Genuity Group, which currently has a “hold” rating on the company’s stock. Canaccord also has a hold rating on Rock Hill, South Carolina-based 3D Systems Corp., another industry leader facing challenges. “I do think that we’re in pause.”

At the end of June, Stratasys’ stock closed at $34.93 per share, its lowest point in more than three years. That’s more than $100 per share below its peak in early January 2014, when it hit $136.46 per share.

Despite its depressed stock price and recent losses, the company continues to grow at a rapid clip. Since completing its deal to buy the consumer-focused MakerBot personal 3-D printer line in August 2013, Stratasys has acquired, or agreed to acquire, five additional companies including another just announced at the beginning of July (see “Recent Acquisitions,’’).

The company also continues to expand its network of resellers and marketing partners (see “Recent Partnerships,”).

“The goal is to continue to develop new manufacturing strategies around 3-D printing,” says E.J. Daigle, dean of robotics and manufacturing for Dunwoody College of Technology, which partnered with Stratasys in June. As students show increased interest, he says Dunwoody is looking to add an additive manufacturing certificate to its programs.

Stratasys, based in Eden Prairie and Rehovot, Israel, was co-founded in 1988 by industry pioneer Scott Crump, who invented fused-deposition modeling, a process that became one of the techniques used for 3-D printing. Historically, the business of Stratasys focused on larger industrial clients that were using the “additive manufacturing” technology to produce prototypes or products.

But with its MakerBot deal, the company is clearly taking a run directly at consumers. While MakerBot brings buzz, digesting the deal has been to blame for much of the red ink the company’s been bleeding. And the printers are still pricey for consumers: The MakerBot Replicator Mini lists for $1,375.

Burleson says he read the Stratasys deal to buy MakerBot as a “defensive acquisition,” as some of its early patents were expiring. He adds that the company subsequently had to deal with some quality issues with defective extruder heads on MakerBot printers. Stratasys has cut jobs and is reorganizing the MakerBot unit.

In mid-June Stratasys announced that it was spinning off its Bold Machines incubation unit, led by Bre Pettis, who co-founded MakerBot and served as its CEO until the fall of 2014. But Burleson says the departure of Pettis was no surprise: “I don’t think that he had ambitions to be part of a big corporation for very long.”

Burleson sees a brighter future for Stratasys, once the current uncertainty passes. “I like management. I think they have a good management team. It’s a challenging environment,” he says. “The stock’s performance makes it look like something more dire is happening. I do expect the company to return to double-digit organic growth.”

But the industry is evolving quickly. Traditional 2-D printing giant Hewlett-Packard is set to fully roll out its own 3-D printers, with a new “multi jet fusion” technology, in 2016.

While the scale of HP’s investment isn’t yet known, the company’s statements have already taken a few shots across the bow of competitors. “The potential of the 3-D printing market has yet to be fully realized,” it says. “We believe HP Multi Jet Fusion technology will offer a strong value proposition, delivering 10 times faster speeds and higher quality at a significantly lower purchase price than comparable systems.”

Clearly, Stratasys thinks it can learn a few tricks from Hewlett-Packard. In November, Stratasys announced that it had tapped Chris Morgan, a 25-year veteran of Hewlett-Packard, as its chief marketing officer.

In the long term, analysts are bullish about the 3-D printing business. But it’s not clear if Stratasys will be able to maintain its long-standing status as an industry leader as competition intensifies.

“We’re at an inflection point,” says Pete Basiliere, research vice president with Stamford, Conn.-based Gartner Inc., a global technology and advisory company. “Overall the market is still very strong. It’s definitely poised for growth.”

Fact 2


Recent Partnerships

Announces a marketing partnership with Creaform, a $4 billion Canadian company that’s a leader in 3-D scanning technology.
Strikes a deal with Minneapolis-based Dunwoody College of Technology to further incorporate 3-D printing into its curriculum.
MakerBot and retailer Sam’s Club expand their partnership by announcing that the desktop MakerBot Replicator Mini will be available in all 600-plus Sam’s Club locations nationwide.


3-D Roller Coaster:

Second-Quarter Closing Prices for SSYS

June 30, 2015:

June 30, 2014:

June 28, 2013:

June 29, 2012:

June 30, 2011:

Source: NASDAQ