today is Dec 03, 2022

When it comes to 3D printing systems, "razors" and "blades" are the name of the game.

Like the famous Gillette business model, the idea is to first sell a lot of 3D printers (the razors), and create a large installed base of machines. Then, those printers can be expected to consume more 3D filament (the blades) over time, as customers use them to 3D-print objects.

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Image source: Getty Images.

And here's the good news for investors in 3D printer maker Stratasys (SSYS -1.39%): It sold a lot of razors and blades in Q1.

Reporting earnings for its first fiscal quarter 2022 Monday evening, Stratasys boasted that its 22% sales growth rate resulted in its "highest first quarter revenue in six years."  

It didn't result in Stratasys earning any profit, unfortunately. When calculated according to generally accepted accounting principles (GAAP), Stratasys lost another $0.32 per share for the quarter. On the other hand, on a pro forma basis Stratasys managed to eke out a $0.02 per share "non-GAAP" profit -- better than the $0.04 per share non-GAAP loss that Wall Street had predicted.  

Profit margins

The other good news Monday regards specifically what Stratasys is selling more of. To wit, sales of 3D printing systems were the main driver in the quarter, with sales up 36.7% year over year. Management didn't give a clear number for the amount of revenue it got from selling printers, versus revenue from selling consumable printing filament. Stratasys actually lumps both of these items together under the category of "products" sales, as opposed to its "services" sales maintaining and warranting the health of its printers. As a result, it's hard to say how much consumables sales grew in the quarter -- or what percentage of total products sales involved consumables.

Still, the news seems largely good. As CEO Dr. Yoav Zeif confided, he is "particularly excited by the early momentum and contributions from our new Origin P3, H350 SAF and Neo systems, designed for high-volume production of end-use parts." As Stratasys explained recently in its 20-F filing with the SEC, its higher-end systems "typically" generate higher gross profit margins than its entry-level and desktop systems. The company also notes that sales of consumables -- filament -- also yield superior gross profit margins.  

So the upshot is this: In Q1, Stratasys' installed base of printers got dramatically bigger. Even better, the specific printers sold lean toward "high-volume" models that are themselves higher margin, and that will tend to generate even more sales of high-margin consumables in the future.

While investors may still be disappointed to learn that Stratasys sees no prospect for profits this year (it's actually predicting a $1 to $1.11 per share net loss in 2022), long term, this is still good news for Stratasys.