As several national economies rebound from the COVID-19 pandemic, 3D printing companies are getting ready for greater demand for advanced manufacturing technologies. Thanks to an inherent demand-driven approach, additive manufacturing (AM) gained a lot of traction in 2020. It has proven an ideal solution to supply chain complexities and the limitations of traditional manufacturing models. As part of a strategy to extend its leadership position in polymer 3D printing, Stratasys has focused on a broad range of acquisitions, investments, and new product launches in both its hardware and software segments.
After reporting first-quarter earnings for 2021 that beat analyst estimates, Stratasys CEO Yoav Zeif said he expects to see significant benefits from investments in acquisitions and that revenue growth should accelerate in 2022 and beyond. Revenue grew 1% year over year to $134.2 million in the quarter that ended March 31, surpassing the Zacks Consensus Estimate of $133 million. This was mainly due to a particular trend in 3D printer sales that rose nearly 41%. The company expects to see a second-quarter revenue increase of 18% and a sequential boost in the back half of the year.
According to a company statement, product sales in the first quarter were $90.3 million, an increase of 8.6% compared to the same period last year. This is a sign of end-market recovery compared to 2020, when system sales were lowest in the first quarter due to the impact of COVID-19. Service revenue was $43.9 million, down 11.8% compared to $49.7 million for the same period last year. Customer support revenue was $27.6 million within service revenue, a 2.2% decline compared to $28.3 million in Q1 2020. This is mainly attributable to the commercial aerospace industry, which had a much slower recovery from the pandemic compared to other industries, such as healthcare and education.
Results for Stratasys Q1 earnings show net loss dwindled to $18.9 million, or 32 cents per share, from a loss of $21.7 million, or 40 cents per share in the same period of 2020. As for gross profit, results were down 7% from the year-ago quarter to $55.7 million. While operating expenses were $73.9 million, an improvement of $5.8 million or 7.3% compared to the same period last year, primarily due to the resizing measures during the second quarter of 2020. During the quarter, the company raised growth capital of $230 million of gross proceeds and ended the quarter with $530.4 million in cash and short-term deposits, compared to $299.1 million at the end of 2020.
During an earnings call held on May 5, 2021, Zeif pointed to future new technologies and additional acquisitions as key to the company's growth strategy. Recently, Stratasys acquired 3D printing startup Origin and UK-based RP Support (RPS), a provider of industrial stereolithography 3D printers and solutions, to help build its product portfolio. It also launched three new 3D printers for end-use parts '“ the Origin One, the H350, and F770 FDM'“, and announced plans to introduce three new technologies during the second half of the year.
Stratasys stock had a great start to the year. In 2021 stock was up 10.7% through April 22, leaping to almost $55 in February, before lingering back between $30 and $22 during most of March and April. Company shares initially fell after financial results were disclosed but recouped losses two days later. Much of the stock drop could also be attributable to the broad tech stock segment hitting its low of the day following announcements on May 5, 2021, by Treasury Secretary Janet Yellen. The former chair of the Federal Reserve suggested that interest rates may need to rise to prevent an economic overheating.
To serve growing demand and strengthen its leadership in the industry, Stratasys is increasing its product portfolio. For dental, the company released a multi-color, multi-material J5 DentaJet 3D printer, enabling professionals to load mixed trays of dental parts. Like NEOLab in Massachusetts, customers have already begun using it to create multiple models in one print, with minimal post-processing. Stratasys already serves 3,000 orthodontics and dental clinics across the U.S. alone, so any new printer series it releases has a strong potential customer base in an industry that has been one of the earliest to adopt AM for true production parts. Dental is currently over a $1 billion opportunity for 3D printing.
As for its software segment, the focus was on expanding the software ecosystem platform with the launch of the GrabCAD software partner program and GrabCAD connectivity Software Development Kit (SDK) to provide customers with end-to-end AM solutions. Another stronghold for the company is its 'œland and expand strategy.' Once Stratasys begins working with a customer, it seeks to extend and expand the contract, as it did with Airbus.
The original agreement signed between the two companies over five years ago only focused on producing parts for the Airbus jetliner A350 as an alternative to traditionally manufactured parts, increasing supply chain flexibility. However, Zeif described during the earnings call that once Airbus started printing parts with its FDM technology, they soon progressed from a small number of alternate parts to using the technology for serial production at a much larger scale. An updated agreement now ensures Stratasys will also make parts for the A300, A320, A330, and A340 and replacement and spare parts to maintenance, repair, and operations (MRO) applications.
Energized over the potential expansion of the 3D printing business into new segments and industries and overcoming the economic downturns resulting from the pandemic, Stratasys will focus on end-use part manufacturing and expects this demand driver to produce compound annual growth of over 20% starting in 2022.