3D Systems (DDD) Warns on Profits

February 5, 2014 8:49 AM EST
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3D Systems Corp. (NYSE: DDD) anticipates its full year revenue to be in the range of $513 million to $514 million (consensus $514.24 million), within its previously raised revenue guidance range of $500 million to $530 million on over 30% organic revenue growth and over 50% total revenue growth for the fourth quarter of 2013. Compared to its expectations, the company experienced much stronger professional 3D printers and materials demand and softer on-demand parts and consumer demand during the fourth quarter. As a result, the company expects to report its December backlog nearly doubled sequentially to $28 million which included multiple advanced manufacturing 3D printers orders that it plans to deliver over the next year. These are preliminary, unaudited results based on current expectations and actual results may differ.

The company expects to report that its gross profit margin remained materially unchanged despite expanding unfavorable mix pressure that resulted in a slight decrease for the quarter. Consistent with management's prior comments and actions, the company expects to report that its non-GAAP earnings per share compressed as a result of a substantial increase to its R&D expenditure related to its accelerated new product developments, a step up in sales and marketing expenses related to its rapid products channel expansion and higher costs related to its acquisition concentration during the quarter.

Accordingly, the company expects its non-GAAP earnings per share to be in the range of $0.83 to $0.87, below its previously expected guidance of $0.93 to $1.03 and its GAAP earnings per share to be in the range of $0.43 to $0.45. The consensus $0.96.

The company expects to report final fourth quarter and full year 2013 results on February 28, 2014

The expects its 2014 revenue to be in range of $680 million to $720 million and expects GAAP earnings per share in the range of $0.44 to $0.56 and non-GAAP earnings per share to be in the range of $0.73 to $0.85. The consensus is $671.3 million and $1.27, respectively.

"Consistent with our previous comments, during the fourth quarter we made very significant R&D, manufacturing and marketing investments designed to accelerate revenue growth that resulted in substantially compressed earnings for the fourth quarter," said Avi Reichental, President and Chief Executive Officer, 3DS. "As we previously stated, we are willing to tolerate earnings reduction and even slight gross profit margin compression during this period to substantially accelerate our growth rate and market share. We firmly believe that these accelerated investments that already resulted in the announcement of 24 new products over the past nine weeks position the company to double its revenue over the next couple of years on organic growth of at least 30% going forward and to achieve greater earnings power and profitability over the long term."

Management believes that the ultimate measure of the company's success will be the sustainable value it creates over the long term and expects greater value to be created as a direct result of its ability to extend and solidify its leadership position via these accelerated actions and investments. Management continues to balance its focus on growth with emphasis on long-term profitability, but given the near term opportunities, is choosing to prioritize growth because it believes that scale is central to achieving the full potential of its business model.

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