ExOne Reports 7.5% Revenue Growth in H1, Raises Full Year Guidance
The ExOne Company, a global provider of 3D printing machines and 3D printed products, materials and services to industrial customers, reported revenues increasing by 7.5% in fiscal H1, totaling $21.7 million. ExOne reports that $8.5 million (+22%) are related to the sale of 3D printing machines and the remaining $13.2 million (stable) derive from 3D printing services.
“Timing impacted our $10.8 million reported revenue for the second quarter, as $2.8 million of revenue carried over into the third quarter by one day. However, our 2017 first half realized 22% growth in machine revenue over the same period in 2016. We believe we are on track to achieve full year consolidated revenue growth in the range of 20% to 25%, considering the exclusion of certain revenue associated with our exited facility,” stated Jim McCarley, ExOne’s Chief Executive Officer. “Our operating results for the quarter include investments we are making in our technology, people, and processes to continue the advancement of binder jet technology in the marketplace. Based on our continuing progress, we expect these efforts will significantly improve our future financial performance. We remain confident in our strategic direction and in our pipeline of projects with both new and repeat customers.”
Gross profit was $2.0 million, resulting in an 18.8% gross margin for the 2017 second quarter, compared with 29.8% in the 2016 second quarter. The 2017 quarter was impacted by a $1.5 millioncharge for obsolete inventories. This was partially offset by approximately $0.3 million of net gains on the disposal of property and equipment related to the Company’s consolidation and exit from its North Las Vegas PSC. The 2016 second quarter gross profit benefited by approximately $0.5 million from a sale associated with an exited product line, partially offset by approximately $0.2 million of losses on disposals of property and equipment.
“The obsolete inventory charges of $1.5 million are associated with the completion of a design evaluation of our Exerial platform, as well as other activities to enhance our machine platforms. These charges were for obsolete raw material and component inventories, principally Exerial machine frames and other fabricated components.” said Brian Smith, ExOne’s Chief Financial Officer.
R&D expenses of $2.3 million for the quarter were up $0.4 million compared with the 2016 second quarter, attributable to investments in internal talent and external resources for machine and organizational development activities. SG&A expenses increased to $6.0 million compared with $4.7 million in the prior-year quarter, due to investments in internal talent and external resources for technology advancement, as well as the impact of a bad debt recovery in the prior-year second quarter.
The Company anticipates the higher investment levels in both R&D and SG&A to continue on an absolute dollar basis, but decline as a percent of sales, over the balance of 2017.
The 2017 second quarter net loss was $6.4 million, or $0.40 per share, compared with a $2.9 million net loss, or $0.18 per share, in the second quarter of 2016. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), a non-GAAP measure, was a $4.8 million loss in the 2017 second quarter, compared with a $1.4 millionloss in last year’s second 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”), Adjusted EBITDA assists in the understanding of its financial results. See the attached tables for important disclosures regarding the Company’s use of Adjusted EBITDA as well as a reconciliation of net loss (most directly comparable GAAP measure) to Adjusted EBITDA for the quarters ended June 30, 2017 and 2016.
Gross profit was $3.6 million, resulting in a 16.7% gross margin in the first half of 2017, compared with 26.7% in the first half of 2016. The 2017 first half was impacted by the $1.5 million charge for obsolete inventories previously described. Additionally, the 2017 first half was impacted by approximately $0.7 million of costs associated with the Company’s consolidation and exit from its North Las Vegas PSC and non-core specialty machining operations in Michigan, partially offset by approximately $0.3 million of net gains on the disposal of the impacted property and equipment. As previously noted, the 2016 first half benefited by approximately $0.5 million from a sale associated with an exited product line, partially offset by approximately $0.2 million of losses on disposals of property and equipment.
R&D expense was $4.3 million in the 2017 first half compared with $3.8 million in the 2016 first half, with the increase primarily occurring in the second quarter previously described. SG&A for the 2017 first half was $12.3 million, up $2.3 million compared with the prior-year period. The increase was principally due to the factors previously described for the second quarter, as well as an impairment of intangible assets of $0.3 million associated with exited product lines and an increase in selling costs to support revenue growth. The net loss was $13.2 million, or $0.82 per share, for the first half of 2017 compared with $8.4 million, or $0.53 per share, in the 2016 first half.
Adjusted EBITDA was an $8.6 million loss in the first half of 2017, compared with a $5.0 million loss in last year’s first half. ExOne management believes that when used in conjunction with other measures prepared in accordance with GAAP, that Adjusted EBITDA, a non-GAAP measure, assists in the understanding of its financial results. 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 six months ended June 30, 2017 and 2016.
Cash, cash equivalents and restricted cash as of June 30, 2017 were $25.2 million, compared with $28.2 million at December 31, 2016. Cash used for operating activities during the first half of 2017 and 2016 was $6.9 million and $0.2 million, respectively. The first half 2017 cash used for operating activities reflects the impact of a higher net loss and increased working capital usage, primarily to support anticipated sales volume in the second half of 2017. Cash capital expenditures were $0.4 million for the first half of 2017 compared with $0.3 million for the first half of 2016. The first half of 2017 included $3.7 million of cash proceeds from the sale of property and equipment associated facility exits.
“We are revising our 2017 revenue outlook modestly, to a range of 20% to 25% growth. Our guidance is based on our backlog and anticipated growth in the second half, particularly in the fourth quarter. In the third quarter, we expect the Exerial™ beta machine sales will unfavorably impact earnings and we will continue to make investments in organizational and R&D activities. However, we remain convinced that these costs will prove to be good investments and we remain on track to reach positive Adjusted EBITDA by the end of the year. Additionally, we expect a total cash balance in excess of $20 million at year end,” concluded Mr. McCarley.