Stratasys Inc. (SSYS) reported first quarter 2011 earnings per share of 20 cents, which outpaced the Zacks Consensus Estimate by 3 cents.
Revenue
Stratasys reported first quarter 2011 revenue of $33.8 million, up 49.1% from $23.0 million reported in the year-ago quarter. Excluding a one-time warrant charge in the year-ago quarter’s revenue, total revenue increased 23.0% on a year-over-year basis from $28.0 million.
The company reported a slight dip in its shipments, which totaled 567 units for the first quarter versus 610 units for the same period last year.
The company witnessed a significant improvement in revenue from the high-margin consumable, which increased 36% year over year based on higher customer usage and the company’s growing installed base of systems.
Segment-wise, revenues from Products came in at $27.8 million, up 28.1% from $21.8 million reported in the year-ago quarter. Services revenue was up 4.0% year over year to $6.48 million from $6.23 million.
Operating Results
Gross profit of $18.2 million (53.2% of the total revenue) in the first quarter of 2011 increased 93.7% from $9.4 million (40.9% of the total revenue) in the year-ago quarter. The gross margin improvement was fueled by higher revenue from consumables.
Moreover, higher Fortus 3D production systems sales (up 60%) arising from the improvement in demand for direct digital manufacturing applications led to the significant upside in gross margin.
Operating income in the first quarter was $6.17 million, versus a loss of $0.76 million reported in the first quarter of 2010. However, operating expense was steeper by 18.7% from the year-ago quarter primarily due to a 12.3% increase in selling, general and administrative expense.
The company reported net income of $5.0 million or 23 cents per share in the first quarter compared with a net loss of $443,000 or 2 cents per share for the same period last year. Non-GAAP net income, which excludes certain discrete items such as one-time gain on sale of investment, was $4.3 million or 20 cents per share in the first quarter compared with $2.74 million or 14 cents per share in the prior-year quarter.
Balance Sheet
The company exited the quarter with cash, cash equivalents and short-term investments of $44.44 million, up from $36.35 million reported in the previous quarter. The company does not have any long-term debt.
Guidance
Stratasys did not provide any revenue or earnings guidance for the second quarter of 2011. Management is impressed with the positive trends in the company’s business during the first quarter and remains optimistic regarding the latter half of 2011. It also expects the acquisition of Solidscape to have a modest near-term positive impact on earnings.
Moreover, the company is also optimistic about the longer-term potential of adding new products in their existing portfolio and developing their technology for the new DDM applications.
Conclusion
In addition to improving macroeconomic conditions, the company’s new collaboration with technology major Hewlett-Packard Company (HPQ) and slow revival of the U.S. economy spending would aid future growth. However, we are a bit apprehensive about the company’s high-cost business model and stiff competition from big and small players.
The company has a Zacks #2 Rank, which implies a short-term Buy rating on the stock.
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