Stratasys' Q2 Report Includes Disappointing Q3 Guidance

3D printing giant Stratasys (NASDAQ:SSYS) has had a tough time the last few quarters, and investors and analysts were keen to see if its Q2 financial results would bring a change in fortune. 
And indeed, the company’s quarterly revenues were in line with expectations, marking an improvement over disappointing Q1 revenues. However, Stratasys’ disappointing Q3 guidance has cast a damper on that positivity.

Q2 2015 meets expectations

On Thursday, Stratasys released its Q2 2015 financial results, commenting that revenues came to $182 million, a slight increase from $178.5 million in Q2 2014. The company’s GAAP net loss for the period was $22.9 million, or $0.55 per diluted share, and its non-GAAP net income was $8 million, or $0.15 per diluted share.
As mentioned, those results are an improvement over Stratasys’ disappointing Q1 figures; they are also in line with Oppenheimer analyst estimates.

Lower Q3 financial guidance

But despite that positivity, Stratasys also said Thursday that it’s decided to withdraw its previously delivered full-year financial guidance “due to the Company’s limited visibility regarding the timing of improvements in growth.” Furthermore, its Q3 guidance now falls below analyst expectations — Stratasys anticipates total 2015 revenues of between $175 and $190 million and sees non-GAAP net income falling between $0.03 and $0.13 per diluted share.
According to Oppenheimer’s Holden Lewis, “the actual guide for 3Q15 is worse than we expected,” and that will “probably keep investors at bay until some confidence in 2016 can be gained.”

CEO confident in future

Even so, Stratasys CEO David Reis remains optimistic about the future of his company. He said in Thursday’s release, “short-term, we will continue to make adjustments to our expenses to align with current market conditions. Long-term, we remain committed to [… initiatives…] which are designed to drive future growth.”
The company continues to spend on R&D, and invested $22.5 million, or 12 percent of revenues, this past quarter. This investment can be witnessed in the enhanced high-end system capabilities of the company’s Object1000 Plus 3D Production System, which is exhibiting significant speed improvements, and the high-volume filament packaging solution for the Fortus 3D Production Systems.

A market at rock bottom

Disappointing Q1 reports from Stratasys and other major 3D printing companies left investors waiting to see how these companies would fare in 2015’s second quarter. For 3D printing expert TJ McCue, “the big question is — are we at the bottom? Will 3D printing stocks go up from here?”
Unfortunately for market watchers, Stratasys’ Q2 report doesn’t seem to answer this question; the company managed to recover slightly from its dismal Q1, but its downgrade in Q3 guidance and withdrawal of full-year guidance together exhibit a degree of pessimistic uncertainty about the market.
Nevertheless, analysts agree that the 3D printing market will eventually turn around, and so the question for investors remains: when will that take place? Depending on the answer, now may be a good time to buy into a lagging market that is promised to expand.
 
Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article. 
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