The ExOne Company Reports Third Quarter 2015 Results
- Revenue was $8.9 million; Non-machine revenue grew 20% to $6.5 million
- Shipped nine machines in third quarter, despite customer deferrals impacted by third quarter currency devaluations
- Anticipate shipping between 12 and 16 machines in fourth quarter of 2015
- Record backlog of $22.8 million combined with expected fourth quarter shipments of higher value indirect printing machines provides confidence in growing customer adoption
- Revising 2015 guidance to reflect customer deferrals: Revenue of approximately $40 million and gross margin of 17% to 21% excluding non-recurring facility integration expenses
- Decline in market capitalization triggered $4.4 million non-cash goodwill impairment charge
NORTH HUNTINGDON, Pa., Nov. 9, 2015 (GLOBE NEWSWIRE) -- The ExOne Company (NASDAQ:XONE) ("ExOne" or "the Company"), a global provider of three-dimensional ("3D") printing machines and 3D printed and other products, materials and services to industrial customers, reported financial results today for the third quarter and nine-month period ended September 30, 2015.
Third Quarter Revenue – Non-machine Revenue Growth Continues
|Quarter Ended||Nine Months Ended|
|September 30,||September 30,|
|Revenue by Product Line|
|3D Printing Machines:|
|3D Printing Machines - third party||$ 2.3||25%||$ 4.2||44%||$ 4.7||19%||$ 12.6||45%|
|3D Printing Machines - related party||0.1||1%||--||1.2||5%||--|
|3D Printed and Other Products, Materials and Services ("Non-machine"):|
|3D Printed and Other Products, Materials and Services - third party||6.5||73%||5.4||56%||18.2||75%||15.5||55%|
|3D Printed and Other Products, Materials and Services - related party||0.0||0%||--||0.1||0%||0.0||0%|
|Total Revenue||$ 8.9||100%||$ 9.6||100%||$ 24.2||100%||$ 28.1||100%|
Consolidated sales for the third quarter were $8.9 million. Non-machine revenue grew 20% to $6.5 million, representing 28% growth excluding the effects of changes in foreign currency exchange rates. Consolidated sales in the 2015 third quarter were unfavorably impacted by approximately
$0.5 million, or 5%, due to changes in foreign currency exchange rates compared with the 2014 third quarter.
S. Kent Rockwell, Chairman and Chief Executive Officer, commented, "Our performance reporting is comprised of two revenue streams. They are the sale and lease of indirect and direct printing machines as well as our non-machine revenue which includes the sustaining operation of those machines in our PSCs and our customers' shops. Non-machine revenue continues to perform consistently, with good growth on a global basis as our installed base expands. As our overall revenue grows and our PSCs increase their output of services provided, the resulting incremental margins will add effectively to our overall performance objectives."
Mr. Rockwell continued, "Machine sales growth opportunities remain very positive for ExOne and we continue to be enthusiastic about our efforts to establish a dominant market position over time. But our customers' delivery scheduling and the complex revenue recognition model for certain of our products and technology have proven to be highly erratic for us to timely predict on a quarter-to-quarter basis. As we move from the sale of prototyping machines to the sale of production machines, the time needed for installation and customer acceptance is prolonged due to the application-specific nature of each customer's requirements. Such customer sales cycles are currently varying between 30 days to 15 months, depending on the complexity of the system installation requirements, not counting time invested with our customers in advance of contract commitment. While we are achieving consistent customer satisfaction of these more demanding systems, we encounter increasing difficulties in our ability to forecast the time cycle from order placement to customer acceptance. Additionally, our third quarter 2015 orders and shipments were negatively impacted due to the August currency devaluations in China and Russia. We are encouraged that the customers continue to explore those opportunities for future periods."
Given the long sales cycle and significance of a machine's average selling price relative to total revenue, fluctuations in machine-sale revenue vary from quarter to quarter. ExOne does not believe that such quarter-to-quarter fluctuations are necessarily indicative of larger trends.
Third Quarter Operations – Volume and Mix Impact Results
Gross profit was $1.2 million, resulting in a 13.2% gross margin, in the 2015 third quarter compared with $2.5 million, resulting in a 25.8% gross margin, in the 2014 third quarter. Compared with the prior year, third quarter 2015 gross margin was primarily impacted by lower volume of machine sales, an unfavorable mix of machine revenue versus non-machine revenue and higher production costs, including those associated with the Company's expanded global facilities integration as well as its ERP system implementation.
As a result of a significant decline in the Company's market capitalization during the third quarter and continued operating losses and cash flow deficiencies, ExOne concluded that the carrying amount of its goodwill was in excess of its implied fair value, resulting in a $4.4 million, or $0.30 per diluted share, non-cash impairment charge which has been recorded in the third quarter.
Operating loss was $10.1 million compared with a $4.4 million operating loss in the third quarter of 2014. SG&A expenses were $5.0 million compared with $4.6 million in the prior-year quarter, with the increase driven by costs associated with deployment of the Company's ERP system. R&D expenses for the quarter decreased $0.5 million to $1.8 million, compared with $2.3 million in the 2014 third quarter. Net loss for the reported quarter was $10.1 million, or $0.70 per diluted share, compared with a net loss of $4.5 million, or $0.31 loss per diluted share, for the prior-year period.
Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") was a $4.0 million loss in the 2015 quarter, compared with a $3.1 million loss during last year's third quarter. ExOne management believes that when used in conjunction with other measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), that Adjusted EBITDA, a non-GAAP measure, assists in the understanding of operating performance. See the attached tables for important disclosures regarding the Company's use of adjusted EBITDA as well as a reconciliation of net loss to adjusted EBITDA for the quarters and nine months ended September 30, 2015 and 2014.
Year-to-Date 2015 Review – Results Not Indicative of Business Progress
For the first nine months of 2015, consolidated sales were $24.2 million. Non-machine revenue grew 18% to $18.3 million in the first nine months of 2015, representing 26% growth excluding the effects of changes in foreign currency exchange rates. Consolidated sales in the 2015 year-to-date period were unfavorably impacted by approximately $1.6 million, or 6%, due to changes in foreign currency exchange rates compared with the 2014 year-to-date period.
Year-to-date gross profit was $2.3 million, down $4.3 million compared with last year's $6.6 million. The 2015 period was impacted by lower volume of machine sales, an unfavorable mix of machine revenue versus non-machine revenue and higher production costs, including those associated with the Company's expanded global facilities integration as well as its ERP system implementation. Gross profit as a percentage of sales was 9.4% in the 2015 period compared with 23.5% last year. SG&A expense for the first nine months of 2015 was $17.5 million, up $2.4 million over the prior-year period. Current year SG&A includes approximately $0.9 million for employee termination costs and ERP system implementation costs. R&D expense was $5.2 million in the first nine months of 2015, compared with $6.0 million in the 2014 period. The 2015 year-to-date period was negatively impacted by the third quarter non-cash impairment charge previously noted.
Operating loss for the first nine months of 2015 was $24.8 million compared with a loss of $14.5 million during the comparable prior-year period. Net loss was $24.6 million, or $1.71 loss per diluted share, for the first nine months of 2015 compared with $14.6 million, or $1.02 loss per diluted share, for the first nine months of 2014.
Updating 2015 Guidance – Introducing Estimated Fourth Quarter Machine Shipments
- Revenue now expected to be approximately $40 million
- Gross margin now expected to be between 17% and 21%, excluding anticipated non-recurring costs estimated at $0.5 million to $1.0 million to complete facility integrations
- SG&A expenses still expected to be in a range of $21 million to $23 million, excluding approximately $0.5 million to $1.0 million of costs associated with ongoing implementation of the Company's enterprise resource planning system
- R&D expenses still expected to be in a range of $6.5 million to $7.5 million
- Capital expenditures now expected to be between $8 million and $9 million, with the increase from previously issued guidance due to transfers of units from inventory to property and equipment for customer leases
Embedded in the updated guidance is between 12 and 16 3D printing machines expected to be shipped in the fourth quarter of 2015, and the Company's estimate of those machines which will qualify for revenue recognition in that period.
S. Kent Rockwell, Chairman and CEO, concluded, "We must now consider the proper metrics to provide a clearer perspective of our business. The growth that is occurring can be reflected in shipments of machines and backlog more than by attempting to portray in which 90 day period these machines might be recorded in revenue. We believe shipments are an important metric since we often collect meaningful cash payments upon shipment. We must remain focused on customer satisfaction more than any other metric measured by time. Anticipated follow-on orders driven by the operational performance of our technology are more important to our long-term success."
Webcast and Conference Call
ExOne will host a conference call and live webcast Tuesday, November 10th at 8:30 a.m. Eastern Time. During the conference call and webcast, management will review the financial and operating results for the third quarter and discuss ExOne's corporate strategies and outlook. A question-and-answer session will follow. The teleconference can be accessed by calling (201) 689-8470. The webcast can be monitored on the Company's website at www.investor.exone.com/.
A telephonic replay will be available from 11:30 a.m. ET on the day of the teleconference through Tuesday, November 17, 2015. To listen to a replay of the call, dial (858) 384-5517 and enter the conference ID number 13621127. An archive of the webcast will be available on the Company's website at www.investor.exone.com/ and will include a transcript, once available.
ExOne is a global provider of 3D printing machines and 3D printed and other products, materials and services to industrial customers. ExOne's business primarily consists of manufacturing and selling 3D printing machines and printing products to specification for its customers using its in-house 3D printing machines. ExOne offers pre-production collaboration and print products for customers through its nine PSCs, which are located in the United States, Germany, Italy, Sweden and Japan. ExOne builds 3D printing machines at its facilities in the United States and Germany. ExOne also supplies the associated materials, including consumables and replacement parts, and other services, including training and technical support, necessary for purchasers of its machines to print products.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "typically," "anticipates," "believes," "appears," "could," "plan," and other similar words. Such statements include, but are not limited to, statements concerning future revenue and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, which include our ability to qualify more materials in which we can print; the availability of skilled personnel; the impact of increased operating expenses and expenses relating to proposed acquisitions, investments and alliances; our strategy, including the expansion and growth of our operations; the impact of loss of key management; our plans regarding increased international operations in additional international locations; sufficiency of funds for required capital expenditures, working capital, and debt service; the adequacy of sources of liquidity; expectations regarding demand for our industrial products, operating revenues, operating and maintenance expenses, insurance expenses and deductibles, interest expenses, debt levels, and other matters with regard to outlook; demand for aerospace, automotive, heavy equipment, energy/oil/gas and other industrial products; the scope, nature or impact of acquisitions, alliances and strategic investments and our ability to integrate acquisitions and strategic investments; liabilities under laws and regulations protecting the environment; the impact of governmental laws and regulations including the related challenges of conducting business in international locations such as Russia; operating hazards, war, terrorism and cancellation or unavailability of insurance coverage; the effect of litigation and contingencies; the impact of disruption of our manufacturing facilities or PSCs; the adequacy of our protection of our intellectual property; material weaknesses in our internal control over financial reporting; the impact of customer specific terms in machine purchase agreements on the period in which we recognize revenue and the impact of market conditions and other factors on the carrying value of long-lived assets and other factors disclosed in the Company's Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Because they are forward-looking, these statements should be evaluated in light of important risk factors and uncertainties.
Should one or more of these risks or uncertainties materialize, or should any of ExOne's underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. The Company disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this news release.
FINANCIAL TABLES FOLLOW.
|The ExOne Company|
|Condensed Statement of Consolidated Operations|
|(in thousands, except per share data)|
Nine Months Ended
|Revenue - third party||$ 8,712||$ 9,640||$ 22,861||$ 28,103|
|Revenue - related party *||152||9||194||32|
|Cost of sales||7,695||7,162||7%||21,881||21,533||2%|
|Research and development||1,825||2,261||(19%)||5,218||6,014||(13%)|
|Selling, general and administrative||5,018||4,593||9%||17,479||15,061||16%|
|Other income – net||(4)||(55)||(93%)||(83)||(210)||(60%)|
|Loss before income taxes||(10,118)||(4,344)||133%||(25,946)||(14,369)||81%|
|(Benefit) provision for income taxes||(41)||107||NM||(200)||274||NM|
|Net loss||$ (10,077)||$ (4,451)||126%||$ (25,746)||$ (14,643)||76%|
|Net loss per common share:|
|Basic||$ (0.70)||$ (0.31)||$ (1.71)||$ (1.02)|
|Diluted||$ (0.70)||$ (0.31)||$ (1.71)||$ (1.02)|
|Weighted average shares outstanding (basic and diluted)||14,429||14,417||14,427||14,409|
|* The nine months ended September 30, 2015 reflect sales of: (1) a 3D printing machine and other related equipment and products/services at fair market value selling prices to a powdered metal company with proprietary powders determined to be a related entity based on common control by the Chairman and CEO of the Company; and (2) a 3D printing machine at a fair market value selling price to a multi-national, diversified metals company determined to be a related entity on the basis that a member of the Board of Directors of the Company also receives his principal compensation from the entity. Both transactions were approved prior to execution by the Audit Committee of the Board of Directors of the Company.|
|NM: Not Meaningful|
|The ExOne Company|
|Condensed Consolidated Balance Sheet|
|($ in thousands, except share data)|
|Cash and cash equivalents||$ 20,253||$ 36,202|
|Accounts receivable – net of allowance of $2,458 (2015) and $2,431 (2014)||5,458||14,238|
|Inventories – net||22,232||17,014|
|Prepaid expenses and other current assets||2,996||3,138|
|Total current assets||50,939||70,592|
|Property and equipment – net||56,325||55,298|
|Other noncurrent assets||2,166||2,875|
|Total assets||$ 109,430||$ 133,430|
|Current portion of long-term debt||$ 136||$ 132|
|Current portion of capital and financing leases||122||346|
|Accrued expenses and other current liabilities||6,337||8,424|
|Deferred revenue and customer prepayments||6,703||902|
|Total current liabilities||16,167||12,357|
|Long-term debt – net of current portion||1,847||1,950|
|Capital and financing leases - net of current portion||103||164|
|Other noncurrent liabilities||24||414|
|Contingencies and commitments|
|Common stock, $0.01 par value, 200,000,000 shares authorized, 14,428,634 (2015) and 14,417,803 (2014) shares issued and outstanding||144||144|
|Additional paid-in capital||156,146||154,902|
|Accumulated other comprehensive loss||(12,057)||(8,203)|
|Total stockholders' equity||91,289||118,545|
|Total liabilities and stockholders' equity||$ 109,430||$ 133,430|
|The ExOne Company|
|Condensed Statement of Consolidated Cash Flows|
|($ in thousands)|
|Nine Months Ended|
|Net loss||$ (24,646)||$ (14,643)|
|Adjustments to reconcile net loss to cash used for operations:|
|Depreciation and amortization||3,819||2,583|
|Deferred income taxes||(269)||--|
|Provision for bad debts||144||145|
|Changes in fair value of contingent consideration||(193)||(194)|
|Loss on disposal of property and equipment||87||--|
|Changes in assets and liabilities, excluding effects of acquisitions and foreign currency translation adjustments:|
|Decrease (increase) in accounts receivable||8,145||(4,411)|
|Increase in inventories||(9,459)||(9,328)|
|Decrease in prepaid expenses and other assets||468||257|
|Increase in accounts payable||850||603|
|Decrease in accrued expenses and other liabilities||(1,386)||(846)|
|Increase in deferred revenue and customer prepayments||5,770||296|
|Cash used for operating activities||(11,007)||(24,595)|
|Increase in restricted cash associated with cash collateral arrangement||(330)||--|
|Acquisitions, net of cash acquired of $201||--||(9,230)|
|Cash used for investing activities||(4,419)||(27,816)|
|Proceeds from exercise of employee stock options||--||318|
|Payments on long-term debt||(99)||(433)|
|Payments on capital and financing leases||(264)||(411)|
|Cash used for financing activities||(363)||(526)|
|Effect of exchange rate changes on cash and cash equivalents||(160)||(302)|
|Net change in cash and cash equivalents||(15,949)||(53,239)|
|Cash and cash equivalents at beginning of period||36,202||98,445|
|Cash and cash equivalents at end of period||$ 20,253||$ 45,206|
|Supplemental disclosure of noncash investing and financing activities|
|Property and equipment included in accounts payable||$ 344||$ 682|
|Transfer of inventories to property and equipment for internal use||$ 3,495||$ 3,935|
|Transfer of property and equipment to inventories for sale||$ 149||$ 332|
|Property and equipment acquired through financing arrangements||$ --||$ 89|
|Net assets acquired through acquisitions, net of cash acquired of $201||$ --||$ 9,685|
|Noncash consideration for acquisitions||$ --||$ 455|
|The ExOne Company|
|Machine Sales by Type|
Nine Months Ended
|*For the nine months ended September 30, 2015, one M-Print and one Innovent unit were sold to related parties.|
|Significant Components of the Change in Revenue by Product Line|
|($ in thousands)|
3D Printed and
|Quarter Ended September 30, 2014||$ 4,218||$ 5,431||$ 9,649|
|Change in revenue attributed to:|
|Pricing and sales mix||(221)||--||(221)|
|Quarter Ended September 30, 2015||$ 2,372||$ 6,492||$ 8,864|
3D Printed and
|Nine Months Ended September 30, 2014||$ 12,616||$ 15,519||$ 28,135|
|Change in revenue attributed to:|
|Pricing and sales mix||(4,504)||--||(4,504)|
|Nine Months Ended September 30, 2015||$ 5,895||$ 18,260||$ 24,155|
|The ExOne Company|
|Adjusted EBITDA Reconciliation|
|($ in millions)|
Nine Months Ended
|Net loss||$ (10.1)||$ (4.4)||$ (24.6)||$ (14.6)|
|(Benefit) provision for income taxes||(0.0)||0.1||(0.2)||0.3|
|Depreciation and amortization||1.3||1.0||3.8||2.6|
|Other income - net||(0.0)||(0.1)||(0.1)||(0.2)|
|Adjusted EBITDA||$ (4.0)||$ (3.1)||$ (15.4)||$ (10.7)|
ExOne defines Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) as net loss (as calculated under accounting principles generally accepted in the United States ("GAAP")) plus interest expense, (benefit) provision for income taxes, depreciation and amortization, goodwill impairment, equity-based compensation, acquisition-related expenses, and other income - net. Use of Adjusted EBITDA, which is a non-GAAP financial measure, as defined under the rules of the U.S. Securities and Exchange Commission, is intended as a supplemental measure of ExOne's performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA should not be considered as an alternative to net loss or any other performance measure derived in accordance with GAAP. The Company's presentation of Adjusted EBITDA should not be construed to imply that its future results will be unaffected by unusual or non-recurring items.
The Company believes Adjusted EBITDA is meaningful to its investors to enhance their understanding of ExOne's financial performance. Although Adjusted EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, the Company understands that it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare ExOne's performance with the performance of other companies that report Adjusted EBITDA. ExOne's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
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