Summary
- Stratasys Ltd. has seen modest revenue growth but continues to post realistic losses.
- The company has given up on preventing shareholder dilution, preserving some cash alongside minor M&A activities.
- Given the multi-year disappointments, I see no reason to get involved, even as Stratasys shares have come down as well.
At the outset of 2021, I noted that Stratasys Ltd. ( SSYS ) was seeing continued struggles, even as the 3D printing boom at the time happened six years earlier already. Ever since, Stratasys has lost a third of its revenue base, incurring losses along the way, as the company was not living up to its expectations or promises. At prevailing low levels at the time, the only argument to potentially become attracted was cheapness, as that never is enough of an argument in isolation.
Some Perspective
Stratasys has long been around as one of the 3D printing promises. A $20 stock in 2011 peaked above the $100 mark in 2014, as shares crashed down to $20 in 2015 having traded around those levels all the way until 2021.
Stratasys was a $750 million business in 2014, as the company touted spectacular organic growth, while making numerous acquisitions as well. Forwarding to 2020, the company has seen revenues fall towards the $600 million mark as losses meant that the company has seen some 10% dilution over time as well, needed to maintain balance sheet integrity.
Amidst a tougher 2020 for obvious reasons, the company only commanded an enterprise value at of $300 million at the lows of $12 per share, equal to roughly half the reported sales levels, as the company was realistically breaking even, but there simply were very few triggers to become upbeat.
I noted that a renewed momentum run, or perhaps SPAC involvement, or outright speculation could be drivers for the shares, but decided to not be involved on the basis of such speculation.
Stagnation With Some Spice
The last sentences of the article at the outset of 2021 were the famous last words, as shares did end up becoming part of a momentum-induced rally to the $50 mark just weeks later. Shares quickly fell back to the $20s and have gradually come down, now trading at just $14 per share just a few dollars from the absolute lows.
On the operational front, the company made some progress in 2021. Following a softer 2020, revenues rose from $520 million to $607 million. While the direction of travel with regard to sales trends was comforting, adjusted operating losses only narrowed from $9 million to $2 million. GAAP losses came in at $62 million, with the gap of sixty million between both earnings metrics stemming roughly equally between stock-based compensation and amortization charges.
The company called for 2022 revenues to rise to $680-$695 million with non-GAAP earnings seen between $10 and $13 million, which realistically results in another lossmaking year. Losses and deals (paid in part with stock) made that the share count rose by 10 million shares to 65 million shares
Following a solid first quarter earnings report , the company hiked the lower end of the sales guidance by $5 million, now seeing full-year sales at a midpoint of $690 million, only to cut the midpoint of the sales guidance to $680 million following the second quarter earnings release, citing the impact of the strong dollar.
In August, the company announced an EUR 43 million deal to acquire Covestro's additive manufacturing materials business, with earn-outs having the potential to increase the deal tag to EUR 80 million.
In September, the company announced a merger for its subsidiary MakerBot with Dutch-based firm Ultimaker. Following the release of the third quarter results, the company cut the midpoint of the sales guidance to $650 million, with $13 million of the $30 million revenue shortfall being the result of the divestment of MakerBot (no longer being consolidated) following its merger with Ultimaker. By now, non-GAAP earnings were seen at just $7 million, with GAAP net losses seen around $44 million.
Expectations Fallen
Amidst dealmaking and continued dilution, the Stratasys Ltd. share count has risen to 67 million shares here, translating into a $938 million equity valuation at $14 per share. After backing out net cash of $349 million, operating asset valuations around $600 million are set to be equivalent to expected sales in 2022. That is about all the good news, as despite some growth the company is not profitable, in fact, realistic losses are reported here if we adjust for stock-based compensation.
While Stratasys Ltd. has not yet provided a peek into 2023, we should not have high hopes given the history of the firm and global economic environment, albeit that a recent retreat of the U.S. dollar means that currency translation effects might even start to provide a benefit down the road.
Given all this, Stratasys Ltd. remains a very easy avoid for me here given the structural soft performance.
For further details see:
Stratasys: Multi-Year Disappointment Continues