One of the leading 3D printer manufacturers, Stratasys has announced financial results for the second quarter and first half of 2020.
For the three months ending June 30, 2020, Stratasys reported revenue of $117.6 million. This figure represents a 28 percent reduction compared to the $163.2 million revenue generated by the company in the same period last year. In the first half of 2020, the business reported overall revenue of $250.5 million, which represents a 21 percent decrease versus $318.5 million earned in H1 2019.
Other 3D printing companies have also reported a drop in revenue due to the COVID-19 pandemic, which has damaged the spending power of the industry’s normal customers. In Q2 2020 HP reported an 11 percent reduction in revenue compared to Q2 2019, and Groupe Gorgé suffered a 35 percent fall in revenue over the same period.
In an earnings call with investors, Yoav Zeif, CEO of Stratasys, explained that COVID-19 had caused Stratasys’ revenue decline by negatively impacting on its customers. Despite the firm’s reduced revenue, Zeif remained upbeat during the call about the company’s future growth potential.
“3D Printing continues to penetrate further into manufacturing across every relevant business sector, we remain very optimistic about where our business and our industry is headed,” said Zeif. “We have the ecosystem, resources, and strategy to further expand our leadership as we enhance and broaden our technology offerings to serve significantly more polymer applications and offer a full suite of solutions.
Zeif explained further: “We believe that these efforts will reboot growth in the short to medium-term, provide us with access to a greater customer share of wallet, and leverage our core competencies to more than double our addressable market, driving our future profitable growth.”
Stratasys Q2 2020 financial results
Revenue at Stratasys is reported across two segments: Products and Services. The Products division includes income generated by the company’s 3D printers and materials, accounting for the majority of its revenue. Services refer to Stratasys’ on-demand manufacturing and consultancy offerings.
In Q2 2020, Stratasys Products generated $73.8 million in revenue, compared to $110.3 million in Q2 2019, a reduction of 33 percent. Over H1 2020, the Products segment generated total revenue of $157 million, a decline of 26 percent on the $215 million reported in H1 2019.
The company’s Services segment generated revenue of $43.7 million in Q2 2020, a 17 percent decrease compared to $52.8 million during Q2 2019. For the first half of 2020, Stratasys’ Services revenue declined to $250.5 million from the $318.4 million reported in H1 2019.
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Stratasys attributed its revenue reduction to the fact it was the firm’s first full quarter under COVID-19 restrictions. The company’s revenue streams were challenged by the reluctance of its customers to spend during lockdown, which hindered the demand for its products. “Cost-mitigation has been a universal business priority, which naturally impacts the purchasing activity of our customers,” explained Zeif. “In addition, printer utilization, and therefore material usage, was low as many users across our install base were not working on site.”
In Q2 2020, Stratasys launched its new J55 3D printer, a smaller counterpart to the company’s established J8 series of PolyJet machines. The system is designed to be easy to use, targeting professional designers and engineers instead of industrial-scale customers.
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During the earnings call, Zeif expressed relief that Stratasys had managed to launch the new printer, in spite of the challenging economic climate. “I am very proud of our team that despite the challenges of COVID-19 we were able to begin the commercial production of our new PolyJet J55 in the second quarter, which began shipping in late June,” said Zeif. So far, the company has described the market response to its new 3D printer as “solid.”
Stratasys fulfilled several large contracts in Q2 2020. Italian packaging machinery manufacturer Marchesini Group S.p.A. installed ten Stratasys FDM 3D printers, as well as two PolyJet multi-material 3D printers. Aerospace company BAE Systems also made Stratasys part of its Factory of the Future initiative, adding to its portfolio of F900 machines.
Returning Stratasys to growth
CEO Zeif explained that upon his appointment in February, the company conducted research that identified polymers as an expanding market in 3D printing. In Q3 2020, Stratasys will focus on “supplementing its portfolio” of plastic additive manufacturing technologies.
“We believe that Stratasys can be the first choice for polymer applications across the industry,” said Zeif. “To help us win in these faster-growing areas, we will invest, organically and inorganically, in new Polymer technologies such as powder-bed fusion, VAT photopolymerization, and others, which will help us generate more opportunities with new offerings to better meet the market demand.”
Leveraging its printing expertise, customer base, and reseller channels, Stratasys believes it can double its addressable market by creating new uses for its technology. In a joint venture with Xaar 3D, the 3D printing arm of inkjet printhead supplier, Xaar PLC, Stratasys is developing a new powder-bed fusion-based system. The machine will be polymer-focused and designed to create additional “manufacturing-focused” applications.
Stratasys is working on the assumption that COVID-19 will continue to weigh on its business until the end of this year. As a result, the firm has introduced a hiring freeze for non-essential positions, and its five percent executive pay cut and 20 percent reduction in working hours are set to continue until 2021.
The company has avoided decreasing its expenditure on R&D, with the only reductions coming as a result of other measures. Overall spending on R&D was flat in Q2 2020 at $21.3 million, compared to the $24 million spent in Q2 2019. The company has stated its intention to “continue investing in new product development programs” during Q3 2020.
In his outlook for the third quarter, Zeif concluded that Stratasys could return to profitability by offering a comprehensive service, which creates new applications for its technologies. “We believe we have the ecosystem, resources, and strategy to be the leader in polymer additive manufacturing for all of the key growth areas,” summarized Zeif. “We are confident that these efforts will reboot growth in the short to medium-term, provide us with access to a greater customer share of wallet, and drive our top-line growth in the future.”
The company’s shares had struggled to recover since a high of $26.55 at the start of the year, but stocks shifted slightly from $15.01 to $15.90 following the financial results.
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Featured image shows a customer looking at a Stratasys 3D printer. Photo via Stratasys.