Stratasys (Nasdaq: SSYS) has announced its earnings for the third quarter of 2024, indicating a bright future for the company. The company is increasing profits and gross margins by cutting costs and focusing more on rapidly growing industries such as aerospace, automotive, defense, medical equipment, and dentistry. CEO Yoav Zeif shared that the new F3300 3D printer has performed well in the market, and major companies such as Toyota and Nissan have adopted this technology. Despite ongoing global economic challenges, trends such as the return of US manufacturing have brought opportunities for Stratasys.
After in-depth research on the data, Stratasys reported that revenue decreased from $162.1 million in the same period last year to $140 million, mainly due to reduced customer spending on capital equipment. Despite the decline in revenue, the company's consumables revenue has increased year-on-year for the eighth consecutive quarter, indicating that despite weak hardware sales, printer usage remains strong. Zeif stated that this resilience is mainly due to the increased use of fused deposition modeling (FDM) technology.
In addition, the gross profit margin increased by 430 basis points to 44.8%. These improvements are due to Stratasys Direct's higher consumable portfolio and higher profit margins, partly due to the company streamlining its services by divesting some lower profit businesses.
The company reported a net loss of $26.6 million, or 37 cents per share, which is an improvement from the net loss of $47.3 million (or 68 cents per share) in the same period last year. It is worth noting that Stratasys has restored non GAAP profitability with a net income of $400000, or 1 cent per share, compared to $2.4 million, or 4 cents per share, in the third quarter of 2023.
The adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was $5.1 million, lower than the previous year's $9.8 million, reflecting challenges to operational profitability due to declining revenue. However, the company's operating cash expenditures decreased from $12.7 million in 2023 to $4.5 million, indicating an improvement in cash management and operational efficiency in a challenging economic environment.
Despite facing some financial challenges, Stratasys remains focused on its long-term growth strategy. Zeif stated, "Our strategy to drive long-term shareholder value revolves around materials, knowledge, and workflow solutions, which are innovative for high growth target industries that benefit from emerging trends. These include addressing supply chain risks, onshore outsourcing, new mobility, customization, sustainability, and continuously improving efficiency and reducing costs throughout the manufacturing industry. Through continuous investment in technology and material development, coupled with a focus on key end-users, we are laying the foundation for Stratasys' next round of growth after the inevitable decline of the current downturn cycle.
Based on this strategic vision, Stratasys seems ready to capitalize on the global trend towards localized manufacturing and onshore operations. During the earnings conference call with investors, Zeif expressed optimism about the opportunities presented by these trends, given the recent election results. He pointed out that the shift towards localized production is completely consistent with the company's focus and is a "tailwind" for Stratasys.
Undoubtedly, the latest results support the overall trend, "Zeif said, referring to the push for manufacturing return and supply chain resilience. Additive manufacturing is highly beneficial in decoupling from China, "he added, pointing out that current geopolitical developments are strengthening the demand for localized manufacturing solutions.
Although he did not disclose specific customer details, Zeff stated that he believes these transformations are creating new growth paths for industries such as automotive, aerospace, and defense, where supply chain agility and customization are extremely important.
Last quarter, Stratasys launched a restructuring plan to enhance business profitability and resilience. In order to reduce costs and increase customer adoption, the company has reduced its workforce by 15% and is expected to save $40 million annually starting from the first quarter of next year.
Zeif stated that the restructuring is being advanced to improve operating profit margins. By focusing on high growth products, materials, and software, Stratasys aims to prepare for a surge in customer spending after the economic situation improves. The company expects that by 2025, this approach will bring higher profitability and cash flow.
Looking ahead, Stratasys has raised its expectations for the full year profit margin and profitability indicators for 2024, while maintaining its revenue expectations. The company expects revenue to be between $570 million and $580 million. The non GAAP gross profit margin is expected to be between 49% and 49.2%, with operating expenses ranging from $276 million to $278 million. The non GAAP operating profit margin is expected to be between 0.6% and 1.3%.
In addition, it is expected that the net loss for the full year will be between $105 million and $90 million, or $1.48 to $1.27 per share. This includes one-time extraordinary expenses, such as resisting hostile takeovers, competing for agency rights, and exploring potential mergers and acquisitions.
Meanwhile, based on non GAAP calculations, the expected net income is between $2.1 million and $5 million, or earnings per share of 3 to 7 cents. The adjusted EBITDA is expected to be between $25 million and $28 million, with capital expenditures between $15 million and $20 million.
Zeif told investors that the current macro environment dominates, and in this high cost capital environment, clients are not in a hurry to invest in new technologies. Nevertheless, the executive also pointed out that the value of 3D printing to customers is still growing, as evidenced by its stable use in various industries. He concluded that regardless of how macroeconomic variables fluctuate, long-term trends such as supply chain resilience, onshore outsourcing, and digitalization of manufacturing remain strong. Entering 2025, Zeif is confident in these trends, and Stratasys is using this time to strengthen its investment portfolio and prepare for significant gains once market conditions improve.
Source: Yangtze River Delta Laser Alliance
