The ExOne Co. Q4 Earnings Conference Call: Full Transcript

Operator: Greetings and welcome to the ExOne Company's Fourth Quarter and Full year 2015 Conference Call. At this time, all participants are in a only listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star, zero on your telephone keypad. As reminder this conference is being recorded. It is now my pleasure to introduce your host Garrett Gauf, Investor Relations for the ExOne company. XONE: Thank you, Kevin and good morning everyone. We appreciate your time today for our fourth quarter and full year 2015 financial results conference call. On the line with me today our Kent Rockwell, Chairman and Chief Executive Officer; Hans Sack, our President and Brian Smith, our Chief Financial Officer and Treasurer of the Company. They will be reviewing the results that are published in the press release distributed after yesterday's market close. If you don't have that release, it's available on our website at exone.com. The slides that will accompany our discussion today are also posted on the website. Referring to the slide deck, on Slide 2 is our Safe Harbor statement. (Safe Harbor Disclaimers). Kent will get started by providing a strategic perspective, Hans will then review our operational progress during the year and Brian will go through the detailed review of the financial results. Then we'll turn it back to Kent to close before we open up the line for question and answer. With that, I'll turn it over to you Kent. S. Kent Rockwell: Chairman and Chief Executive Officer: Thanks very much Garrett and good morning to all our investors. Thank you for joining us on our call today. In general, ExOne -- was pleased with our Q4 performance which is already provided to you. It did offset what was a fairly difficult year for us otherwise as a development of our business. But the Q4 itself did provide indicative results that we can achieve good performance when we have a lot of the larger machines in the sales mix and that did occur in this past quarter. As a result of having the larger machines, we also were able to demonstrate some good operating leverage with gross margins and that again is reflective of the margins on machine sales. The result of the higher volume and the gross margin permitted us to earn an EBITDA - for the second time actually we had one positive quarter back in '13 - but trending in the right direction and while we did have a drop off in revenues from year-to-year, we've built a very large yearend backlog which will benefit us as we burn off this backlog in the coming quarters of '16. So all in all, the performance of this period we thought was quite positive. Looking at the customer demand for our non-machine activities we have had good growth there as the chart showing we had in excess of 20%. That 20% comes on top in the 14 to 15 time, but mostly in 15. We had very dramatic decreases in pricing and so the real output is substantially up far more than the 20% and we even had in addition to pricing changes to benefit getting more customer activity on machines which has to happen as we move into more volumes and machine activity. We also had currency in the period negatively affected our overall revenue performance. So we'd really seen a better growth than that in the non-machinery area. Taking a quick look at the state of adoption and machine sales, you will recall that we have a common technology and binder jetting and its broken down into indirect printing where we print a core and mold package. Larger machines are principally in the indirect printing side and they principally go to foundry applications where they pour a variety of different metals in very different applications depending on the materials that they're trying to create. We are in the direct printing side, they are the smallest machines that we have. We have introduced in event for the last year and this has been successful. The M-Flexes and as a small batch production type machine and a prototyping machine and we have the M-Print which we sold a couple of this year. The M-Print now has printed I think one of the largest parts ever printed, over 55 pounds and that has been able to the demonstrating 100% density. This is a huge opportunity for us as we moved into the future with the development of larger parts at pool density in a variety of materials as well. So we have in the direct business, it's still a nascent business but it has very, very high potential, it has a longer development cycle as you look at the bottom line there. The maturity of direct printing it takes about three years to get customers to move from the kinds of materials that they're using into a 3D printed material and get certified and because we've been doing that now for more than 3 years starting to get customers to move into actual production type activity. So we're seeing more materials qualify for direct printing and that's coming along quite well. Looking at the machine sales side, again you see the number of machines indirect was 15. Everything that we shipped is very easy to get revenue recognition on the smaller machines because of the way they're being used and the users being universities and research institutes. So we generally will see a one to one ratio with revenue and shipments in the smaller machines. In the larger machines, it is must longer installation and acceptance cycle and so we will record revenue only when the machines are fully accepted and doing what the customer wants it to do and as a result we shipped more of these machines in '15 and that leaves us with a lower than anticipated revenue but as pay me now or pay me later, we're going to see that revenue loss start to fall into the early quarters of 2016 and give us an overall really a growth opportunity as we move through this year. We also had some leases. I think we had five leases that we put out. One of them turned into lease purchase and so which shows that over there it's four machines are actually in the net lease position. We do believe as we move into 2016 we're going to see a lot more leasing opportunities and that's something that we are trying to progress with our customers. Different sectors of the economy are more positive than others and one is that is positive for us right now is the automotive industry. The binder jetting technology there has gained a very good acceptance as a rule to across. Almost every automotive manufacturer's using our technology and developing it for moving into the mass production and ultimately into series productions where they will take and replace some of their current production processes with multiple machines and so they're evaluating it. They've gone from evaluating it now to tendering for large orders with their people to do the installations for them and so as it's not a question about when they're going to or whether they're going to buy, it's just a question of when will this technology be fully in place in the production lines of various automotive covenants. We do as a result of that anticipate multi-machine orders in that area and they're just now starting to occur. This is particularly relevant to the line which is our largest production line activity. So the automotive industry is moving now towards serious production and we're comfortable with it that we're give a good piece of that business. I am going to make some other comments at the end of this I am going to let Brian and Hans take you through the operations and the financial performance now. Hans, go ahead. Hans Sack: President: Thank you, Kent. Good morning. Kent, has already touched on a number of things I am going to talk about just adding a little bit more color on my part. My first Slide's number 10 reiterates for our priorities were for 2015 and review this team's focused on customer centric improvement and we have made substantial progress. At the end of my presentation I will go over a slide summarizing our priorities for 2016 which will provide some contrast. Slide 11 please. Highlights of 2015 in terms of machine sales are the following. We sold 10 of our new Innovent machines. These machines lend themselves particularly to R&D purposes in industry and universities for the evaluation of the technology, for the advancement of materials developments or for educational purposes. We also have learned that some customers use these machines for small part production as well. For the Innovent machine we developed a new capability to handle much finer powders to below 10 micrometers. The finer powder enables parts with greater density and better surface finish which are key factors for success in industrial applications. On the indirect printing side and sand printing for foundry applications, we have introduced a new binder system, cold hardening phenolic. It achieves high strength leverage than molds and coarse without the need for microwave heating. As a result, the customers saves time and capital while using less footprint which creates greater efficiency. Customers have shown a lot of interest in the system. The most significant event of the year was the introduction of the exterior model with serious production indirect printer and is getting lots of interest. During 2015 four units where shipped and another was ordered but has not yet shipped. There are multiple additional customers evaluating the exterior and we're working with them to move that process forward. We have been offering leases to some customers as Kent's already mentioned in order to accelerate the placement into service of several machines. This option has also had to few of our customers overcome budgeting hurdles. Next slide. In 2015 we introduced a new system for the printing of layered tools in sand or similar medium. These tools are used to fabricate components from composites in various industries, but especially in the aerospace. When closed, a tubular shape is made, a water soluble binder is used in which case we refer to it as Wash-out Tooling. The significant improvement we achieved in 2015 is that we have lowered the cost of consumer bids for our customers both by finding lower cost sources and through strategically pricing consumer bids to accelerate the acceptance of the technology. By now, most of our PSCs are ISO certified. The remaining ones in Germany and Japan have their certification pending. We have introduced a new model for creating a PSC in Sweden in cooperation with an industry institute. It is operated by the partner staff and production output is shared. In Texas, a machine owned and staffed by ExOne is operating on a customer's property dedicated to their needs. On Slide 13, we provide some other important events in 2015. As I reported previously, we have made efforts to strengthen the organization in the number of areas. A new German CFO, a new Global IT Leader, and new R&D Leader for the indirect printing side and a new Tax Manager were added. We also reorganized our sales group to help increase the focus of the organization. Simultaneously, important processes were improved. I mentioned quality systems already. In addition the sales and service processes were fortified in several ways but notably was sales force and service max, two very helpful software solutions. To support machine sales and customers in the application of their machines, we created the Dream Center in North Huntingdon and the ExTEC Academy in Gersthofen, the Design and Re-Engineering for Additive Manufacturing Center, hence the word DREAM, virtually and physically supports customers and modifying parts in order to obtain the greatest impact from additive manufacturing. The ExTEC academy in Gersthofen provides training and optimization support to customers. Slide 14 please. For 2016, accelerating the adoption rates remains our top priority. We aim to further improve our sales organization's knowledge base and effectiveness, enhance our representative network globally, and make our machines more desirable by enhancing flexibility and broaden their applicability as well as their performance and increase the availability of consumer base. In our PSCs we will seek enhanced utilization rates and endeavor to lower the breakeven point of each facility. Finally, we have embarked on projects aimed at lowering the working capital employed in our machine manufacturing operations generally speaking to leave production concepts and optimizing the design for manufacturability. With that, I hand it over to Brian Smith. Brian Smith: Chief Financial Officer and Treasurer: Thank Hans. Hello, everybody. This is Brian. First, I'd like to comment on the delay in this call. When we set our initial announcement, we believed that we'll be in a position to have the call. We subsequently determined that we needed a little more time to assure ourselves of the accuracy of our numbers and so we found ourselves prudent to the further calls will now we take accuracy of our reporting to the highest level. So, thank you for your patience in that. Turn to Slide 16 please, where we talk about revenue and backlog. We finished the year at 40.4 with a strong fourth quarter guidance of was approximately $40 million and as you can see our mix of non-machine with the growth in our non-machine was very strong this year and so that mix is stronger in the non-machine to machine. The backlog growth principally relates, a large part of backlog is machine backlog. So, you can see how the backlog growth have then impacted on the revenue side. Slide 17, again that non-machine revenue you can see growing at 19% in the quarter and 18% for the year. Kent mentioned that's in spite out some FX headwind principally the change in the Euro, year-over-year as well as some change in the Yen year-over-year and also through some supply chain efforts as Hans mentioned and in qualifying materials, we've been moving toward reducing some of the pricing to relative certain of our consumables. So we felt very good about the good growth in our non-machine area. Machines sales on page 18, as I mentioned earlier in the quarter, we thought good about the $9.6 million. It's not far off of where we were at the end of '14 and again the year '15 was impacted by shipments and growth in our backlog and therefore we had lower overall machine revenue in '15 than '14. Page 19 just reflects that for more information relative to the breakdown between machine revenue. We have sold a couple of machines to a Fortune 500 company of which one of our Board members is employed by as well as shift one machine to another related party. The page 20 or slide 20 talks about the quarterly gross profit and annual gross profit. As you can see, the current quarter shows a strong gross profit and so when we -- we've said before we need volumes to get to higher margin levels and those higher volumes get us to a higher gross margin in '15. '14 was impacted by the move that we had in '14 relative to moving all of our five different facilities into one facility in Gersthofen, Germany when we opened that facility, principally in Q4 of '14 as well as some other moves here in North Huntington relative to our -- expansion of our PSC here. And also would reflect some continuing operating improvements and offset of fixed cost to high volumes particularly in the non-machine area. If you look at the annual margin, it is impacted by the higher or by the lower sales volume and the offset of those fixed costs particularly earlier in the year in Q1 and Q2. Page or slide 21 shows our SG&A. As you can see our SG&A is beginning to level off. At $5.1 million we are running the way we were running back in Q1 and Q2 of '14. We do have generally a little higher G&A in Q4 and Q1 principally related to year-end activities and financial reporting and those matters. So we feel good about some of our efforts around costs and efficiencies. If you look at R&D, R&D on slide 22, is largely employees and facilities. When we see fluctuations in our R&D, those are usually related to some type of material usage either development of machine or other materials that we're qualifying and so we are right in the range of what our expectations were relative to the year for 2015 in R&D and so those were all in expectations, in our guidance. Slide 23, discussion of CapEx. You can see the large decline in CapEx '14 to '15 which we said earlier that we had largely build out our facility expansions. The facility expansions in '15 were really finalizing the payments for those facilities that we opened in '14 that I had mentioned previously as well as some expenditures around things like to dream center as Hans mentioned. The machines and related equipment, our PSC machines and R&D machines as well as machines that we -- that Kent mentioned that we put out on lease this year, the net four machines that went out on least and then our ERP system CapEx has a continued to decline as we've got that ERP system over in Gersthofen, Germany up and running and we are just making refinements to it going forward here. Slide 24, if you remember, we -- in the first quarter, second quarter, and third quarter, we just had this broken down in beginning of the period, end of the period we thought it was -- it showed that the slowdown of both the working capital improvements that we've been making as well as the slowdown in the utilization of cash, both from a CapEx and operating losses, showed a good picture relative to the second half to the first half and showed some of the progress that we've been making in that area. Slide 25, you will see our cash went from 36 to 19 reflective of the breakdown that we provided on the slide 24. We have very low debt. We also added about 13 million of gross proceeds relative to the share issuance we had with an entity controlled by Kent. With that, I'll turn it back to Kent. S. Kent Rockwell: All right. Thanks Brian. Talking about the 2016 outlook, we have tailwinds and headwinds that we have to consider in how we look at the coming year. Helpful in the tailwinds is the fact that we have a good backlog that will burn off in the first couple of quarters, deliveries of machines that are presently out and more than that, we have a very active pipeline that we're expecting to see continued revenue growth and good record performance in '16. The issue is the timing of this. We lack visibility early in the year on capital goods shipments. There is a cycle to the shipments for large machines where we almost never see orders in the first and second quarter, they start in the second quarters, but the orders really consummate in the third and fourth quarters and then it becomes a question of depending on what the order mix is what falls into revenue and certain machines can immediately fall in the -- larger machines can immediately fall into revenue, sometimes there is a larger cycle, definitely something like an -- where there is an awful lot of automation that the customer has to do to be able to, and each of customer is specific in their automation need. So there is some good opportunity, as Hans said, we just started using sales force on a global basis and we've had a lot of new customer disability show up. We also have a much larger sales force this year that we've built last year to put this all in place. So we are enthusiastic that we will see an active pipeline built into good orders as we move through the year. We do have some headwinds. The headwinds are the depressed energy sector. The energy sector is a very vibrant economy for our applications of printing, particularly because anytime you could make balloon shape to something like a pump or a compressor or a valve. These are really bread and butter type activities for our 3D printing, but as everybody recognizes, the energy sector is in a little bit of doldrums. We did have some interesting programs going even though it's been slow, but we're starting to see some order signs even in energy that they are making us feel better about that expectation. Capital spending on an international basis, currency is a huge factor. China represents 50% of the casting business in the world. We have been very fortunate to see a lot of growth in China starting last year and our question is will they constrain capital spending or will they continue to grow as a result of the economic pressures they have within their country. We are -- I saw three new names that I had seen 30 days ago on our order book. So the Chinese do seem to spending, but the rate at which they will spend and install is still not visible enough to us that we should start try and load it into the quarters yet. I do believe that we will have a very positive growth rate in a 15-year, but we are not ready to trip over ourselves trying to give market a forecast at this point in time. I think that the key words here is that we are approaching 2016 with a cautious optimism. I think we feel comfortable that we are going to see good growth. We are not ready put it into sectors of the quarters yet because it's just too hard on this global basis. We are however, we do have a slower adoption rate in the teens as things started to slowdown and so we are considering how to be moderating our spending to be more prudent cost management systems given the lower and anticipated growth in revenues and this would be an important consideration for us as we move through the year. In terms of where we go, we still hold. I mean, I still believe very much the vision of the opportunities that we presented in our 2013 IPO, we've said that in a five to seven-year period, we could make a $150 million to $100 million Company with good margins operating in this sector and that we believe that that opportunity still has the chance to grow great beyond that. We do know that the 3D printing in the global industrial sector is still a growing priority and that priority is now on our question, are we going to be -- this technology is not going to be adopted, but it's just at the what rate it will come in for us. When I look at the indirect printing, it seems to be stabilizing and we're getting more activity there. The direct printing is a longer cycle for development, but the -- I have always stated that I believe that the direct printing will overcome its market size and opportunity as it starts to develop into production activities and we're seeing signs that that's starting to come to life now. It's always a function of getting the materials formally recognized and approved by the users in the different production applications and we have a lot of that going on in our marketplace today. So, the opportunity for direct growth will be very substantial as we -- certainly as we move to the latter quarters here and really as we move into '16, excuse me, '17 and '18. And those opportunities could be $5 million, $10 million, $15 million in one's opportunities because they're fairly large. So, we're committed to successful execution of the strategies that we have been working on for some time. We continue to review that make sure that they are the right strategies and that we always have to amend them by year-end in emerging growth marketplace. But we believe that we'll increase the enterprise value for all of our constituents as we move forward and we're looking forward to a very good year to demonstrate that capability. And with that, we'll move to questions please. Question & Answer Operator: We will now be conducting a question-answer session. If you like to ask the question please press star, one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star, two if you'd like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star key. Once again if you'd like to ask a question today please press star, one at this time. Our first question today is coming from Ben Hearnsberger with Stephens Inc. Please proceed with your question. Analyst: Hey Kent and Brian. Thanks for taking my question. This is Brendon in for Ben. Just on the top-line or '16 understand the cautious optimism, just curious for the full year you guys kind of looking this as a flat year or maybe slight growth? I know that comments we are hearing out of some of the larger guys like the 3D and Stratasys, just kind of trying to get a feel for any of the top line for the -- on a full year basis if it would deviate from that kind of industry outlook? Thanks. S. Kent Rockwell: I have to say that we do not see anything close to flat and it's really the question of how much growth can we consume in this year we got the capacity it was to move to much, much higher levels right now just with the backlog that we have and we're going to able to burn of if we have to have substantial double digit growth at the very minimum in this year. Analyst: Understood. Yes the great color appreciated and then on the gross margin in OpEx in '16 I am assuming gross margin just kind of keep around the same cadence based on a -- machine and then on OpEx you know for like SG&A should we look at the 4Q number on an absolute basis it's kind of run rate for '16 how do we think about that? Thanks Brian Smith: Okay, you're right. This is Brian and from a margin perspective again as volumes increase, margins will improve and you can see that in our quarterly cadence there particularly in the fourth quarter when we get to those types of volumes, we really drove off better margins. So volume means margin and I think you can model from there. Relative to G&A, our OpEx, the targeted 4Q as a run rate would be kind of given in some level of guidance and which we're not in a position to at this point. We are looking at OpEx we are looking at generating positive cash and so we will be taking hard look at where we're spending our money prioritizing in right place and being prudent with our spend and I think those for the comments that gets into the we're making there in the account. Analyst: Understood. Yes, appreciate the color. Thanks guys. Operator: Thank you. Next question comes from Julian Mitchell from Credit Suisse. Please proceed with you question. Analyst: Hi this -- for Julian Mitchell. Given the late timing of this call could you just talk about near term demand trends you've seen developed in January and February. S. Kent Rockwell: Well as I said earlier, the use of our sales force in a much more matured team that's been working together across the globe, we are getting more visibility and we got more inputs, substantially more input into that system and the question is what is at what rate would this move we are spending and we've had -- at one point we've had very substantial business in Russia and now we have lot of consideration about whether Russia does anything that we don't have anything in our forecast at this point for Russia even though they could represent $5 million to $10 million if they turn on but the currency shut them down. So their -- but they need our product and they like our product. So those are opportunities that can open up very, very rapidly, certainly the conditions change. China my biggest concern has been is that China was very-very aggressive about wanting to do a major machine program across the country and we've had a lot of different Chinese companies coming to us, those indirect to direct and we're concerned that China may very-very well with restrict capital outlets spending given their currency issues and their banking issues within the country and that there back to constraints it, they you just have to wait but I will say and again cautiously optimistic, we're seeing sides of new customers in China already early here in the year, that are customers that will be for sure placing orders and then is the question of okay, just that order turned into a revenue recognized shipment and in what cycle but I think that we're going to and continue on the growth path that we had took for last year. Analyst: Great. Thank you and how should we think about capital allocation priorities now that looks likes cash level has stabilized. Brian Smith: Yes. I don't think got as I, we set before we declined our CapEx declined significantly year over year on '14, '15. Absent investment in leasing facilities and perhaps a machine here or there within our own PSCs or for some R&D efforts, I would think that will have much in the way of the CapEx in '16. So further decline in CapEx from '15 to '16. S. Kent Rockwell: The only CapEx might be leasing. Brian Smith: Yes that's what I said, yeah, we would have ... S. Kent Rockwell: Because we do have lot of customers asking for leases and we're working with some third party leasing agents now to try and transfer to other accounts but we don't have anything completed though in that regard yet. Analyst: Great, Thank you very much Operator: Thank you. Our next question today is coming from Saliq Khan from Imperial Capital. Please proceed with your question Saliq Khan: Imperial Capital: Thank you, Hi Kent, hi Brian S. Kent Rockwell: Hey, Saliq. Saliq Khan: First of all some of the competitors has exited the business and focusing a lot more on the commercial and the industrial side. What impact this have in your business and your overall strategy as you look at 2016? S. Kent Rockwell: You are correct, they are trying to move towards where they see more stable markets which is what we saw in the very beginning and we do not see, they are still working mostly in polymer. You do have some of those saying that they're working in mellows, but the technologies that are out there that are competing against our binder jetting technologies are more expensive. At the end of the day, the one benefit that binder jetting has as the low cost alternative to higher volume production and I think that that's been proven out by a lot of our customers have come back and told us that, and some of the researches that we're working on. So we feel no immediate threat from anybody that's out there even though there is a lot of people thrown new stuff out that we certainly have to be aware of it, but we're very comfortable where we are in the mix of things that the markets that we are now addressing are going to get us to that point. We really don't show any machines to consumers. We just sell parts to consumers, so it's a different demand pattern for us. Saliq Khan: 2015, if you take a look at the numbers, you sold more of the S-Max printers and some of the lower price machines like the M-Flex. Are you seeing an industry-wise shift from the types of customers that are purchasing the 3D printing machines or is just the byproduct of your sales guys targeting a particular industry or particular customer base? S. Kent Rockwell: Right, you have to understand that the smaller machines all are going to a total different application and customer base than the large machines which are going into the world of foundry applications where they for finish the product of course in packages. And so there are apples and oranges in every sense of the word you can't interrelate why somebody buying an M-Flex versus a S-Max. The S-Max is our bread and butter machine, the S-Max Furan. We've got over 60 of them out there right now and they are the second generation of our S15. We still have S15, so we're actually taking on trade putting back in to the marketplace and those machines are sometimes 10 years old. So the technology isn't faltering and going away, we are clearing them and rehabbing them and then putting them out in the third world of application. So it's -- we think that we're well positioned and we do have some competition in the indirect -- large indirect machines, but for now I think that we really dominate what's taking place in that market. Saliq Khan: and then the last question I had for you is originally some of this maybe someone else asked previously, but during the second quarter or between the second half of 2015 you've secured a $15 million credit facility and the idea behind that was go ahead and increase overall adoption and get a high number of these machines turning purchases given the optimism that you had, talked about earlier in the call regarding the automotive sector, how this automotive sector being better and has the better outlook for 2016, how is that impact your overall capital structure for 2016 and beyond? S. Kent Rockwell: Well, the $50 million our credit facility that I had put in place was replaced with $13 million of equity. So, we had a very negative small change in total capital availability to address that need. With regards the automotive folks, the automotive teams they are not the ones that are leasing. Where they do lease we lease them sometimes a machine that's really a test bed machine for adapting the technology, but when they go to the principals of the Exerial, we're not leasing Exerials, which is a million --. So, I don't think we have a capital availability issue. We also are starting to find that there are leasing companies out there that are willing to take on our machines in the third party independent leases and I am working very hard on that so that we don't have to use our capital in that matter and I think that the world of the leasing groups out there are now understand that our machines are going to be eclipsed in values in a three to four year period, so they are no more willing to deal with the residual value issues. Saliq Khan: Great. Thank you, Kent. Operator: Thank you. Our next question today is coming from Jason North from Jefferies. Please proceed with your question. Jason North: Jefferies: Hi, can you given an update on when you think you'll be able to recognized revenues on the four Exerial printers that have already been shipped? Brian Smith: Hi Jason, this is Brian, how are you? We will recognize those this year, again we are not going to point to a specific quarter at this point in time, but they are being installed in our customers facilities, we don't have a lots of specific control over that. Our customers are dictating that but they will be recognized in this year. S. Kent Rockwell: Keep in mind please that they are 100% paid for and they were sold under a discount term because of the volume purchase and in fact that they really helping us introduce this new technology to be evaluated and this is a customer that the we believe will buy more machines. They have a couple of our S-Max as well and they are a satisfied provider, that's important for us in our -- in the Chinese market. Jason North: And for the Exerials that you sold, is that to the different customer or the same one, has that reduced price similar to the first quarter, is that the standard --? Brian Smith: That's at better price that is a large automotive customer and so we feel very good about that, but that machine again that is working into capital programs at a large company and so that's not a near term item, that would be later in the year. Jason North: Okay. Later in the year for.. Brian Smith: Jason, just let me add we feel really good about that order. We feel really good and that gives us a lot confidence on that S. Kent Rockwell: It's a customer that has other of our machines and the European manufacturers are very, very focused on the 3D printing technologies for production, series production. They are ahead of everybody else. Jason North: Is that later in the year in terms of a shipment, but not recognized as revenues? S. Kent Rockwell: It will be a shipment, it's 50-50 whether it is recognized this year, it really depends on that kind of automation they want and this is a customer that has the opportunity to buy 10 more so we are going to be very, very aggressive in pleasing that customer and we've already got the deposit on this one. Jason North: Okay. And then last one for me, kind following up the auto opportunity. When your stands for series production, is that for any parts or is that for large scale prototyping or test ones for them? And then either way, what size production runs are you talking about for the parts that you are making, like in the range of 1000, 10,000, 50,000? S. Kent Rockwell: It'll be probably in the range of 10,000 or more. The whole advantage, the whole psychology for using our technology is it gives them much, much more flexibility to be able shutdown and be in line and shift to other production series so that they can make smaller production runs which will allow them a much better inventory management process and you can always build the suite in this manner. So this, the whole psychology for adoption is accepted and it's happening and it's just a question really right now of the integrators that are integrating these systems to replace some of the things such as the blow mold lines and currently we are out there making pistons wire jackets and other parts of the engine systems. Jason North: Great. Thank you very much. Operator: Thank you. Our next question today is coming from James Medvedeff from Cowen and Company. Please proceed with your question. James Medvedeff: Cowen and Company: Hi. Good morning and thanks for taking my question. Just a housekeeping question first, what do you anticipate the weighted average shares outstanding to be in Q1? S. Kent Rockwell: Outstanding shares, the after the acquisitions and the ATM. Brian Smith: I'll get that, I'll get that number for you. Give me a minute, I don't have it right in front of me. James Medvedeff: Okay. Thanks and on the $16.5 million in backlog, I just want to -- is there the 12 machines that shipped, but weren't recognized, is that included in backlog or is that separate? S. Kent Rockwell: Yes. They are shipped, but they haven't been recorded in revenue, they are in backlog. Brian Smith: That's right. We wouldn't ship off any thing, but a firm PO which was mainly will be in backlog and the share account is 16,067,954 at March 22. S. Kent Rockwell: That's in yesterday's 10-K also. Brian Smith: That's right James Medvedeff: Okay thanks. So the 12 that have shipped, but weren't recognized comprises the entire $16.5 million or is there additional -- I guess what does point a machine that's in the pipeline actually be recorded as backlog? Brian Smith: So backlog -- there are a number of machines in backlog and backlog is a firm commitment from purchase order from a customer. We don't put anything in a wish list in that, it's GAAP definition, if you will. S. Kent Rockwell: Some of the backlog also is in non-machine Brian Smith: Yes, yes. S. Kent Rockwell: So there is a certain portion that is non-machines, it's in other orders. Brian Smith: It could be in non-machine, it could be in a contract. James Medvedeff: Okay. So just to recap the $16.5 million consists of the 12 that have not been recognized plus some additional machines plus some non-machine, is that correct? S. Kent Rockwell: Yes. James Medvedeff: Okay and I noticed that I would have expected to see a jump in deferred revenue to go along with any payments that have been received on those 12. So what's the status of cash collection on those 12? Brian Smith: Well, depending on the timing in the PO typically the PO has a 30-day timing where we would -- our typical terms are 30-60-10. So we would get a payment 30 days after the PO date. So depending on the arrival if the PO, our prepayments would relates to the timing of receipt of that 30, 60 or10. So that number will fluctuate, but $7 million is still good strong number for us relative to deferred revenue. Again those are all pretty much all prepayments. James Medvedeff: Okay. Thank you. Brian Smith: Okay, thank you. Operator: Thank you. Our next question is coming from Weston Twigg from Pacific Crest Securities. Please proceed with your question. Weston Twigg: Pacific Crest Securities: Hi, thanks for taking my question. First just wondering if you can give us some commentary, some color on the orders in Q4 given that the backlog declined a bit earlier on the call you said that the Q4 is usually the strongest order quarter? Brian Smith: Yes, I mean, we did ship some that came in in the quarter and went out in the quarter, and we did expect a couple of more orders that came in really subsequently year end. So we feel good about that number. We are going to have periods where we're going to recognize backlogs faster than we received, but we had a good second quarter and with third quarter in receipts of POs last year. So well I don't see any back row trend there that bothers in any way. S. Kent Rockwell: I would like correct that thought just a little, I don't think that we should be saying that the fourth quarter is the largest order quarter because I think that you'll see that if they start towards the end of the second quarter and a very-very active order rate in the third quarter and possible orders in the fourth quarter, a lot of the people that order in the fourth quarter want shipment in the fourth quarter. But the build-up rate is not that we can -- we don't build and ship these big machines in 90 days. So I think you have to look at, there is a build-up that starts in the second quarter and we'll have a good visibility by the end of the second quarter, June, July, we'll have the good visibility on what our full year is going to start to look like. Weston Twigg: Okay. That's very helpful and then just related to those orders on the same track, did you have a number of new customers or can you tell us how many new customers came in in Q4 and ordered equipment? Brian Smith: I don't have that right in front of me, but we'll try to -- we'll think about that and get back to you. But each quarter we've got a mix of both customers that are previous customers and new customers. I don't think the fourth quarter reflected anything different from that. So it's always a mix and it varies by quarter, quarter to quarter. Weston Twigg: Okay. Just also wondering on S-Max, it looks like the ASP declined last quarter. Can you help us understand S-Max ASP in Q4 and if it declined, is that a number we can use moving forward? Brian Smith: So, ASPs are tough one and we wrestle with these questions all the time. We can have a bunch of ancillary equipment with those machines that raise the price because each piece of ancillary equipment could be higher. We could sell a used machine in our -- out of PST, we converted a lease in the current period. So those numbers are going to fluctuate a little bit with all those items and it's not a -- certainly not a macroeconomic trend. Some of those ancillaries could be a couple of different job boxes, they could be extra print heads, they could be other ancillary equipment that help move the job boxes, those type of things. So it's a tough one just to pin down on a singular quarter basis. Weston Twigg: Okay, yes that makes a lot of sense. And since you mentioned leases maybe, can you help us to understand leases as a percentage of revenue in 2015 and what you think that percentage might be in 2016, leases? Brian Smith: I don't have it right in front me, but we had five leases during the year that were entered into during the year and we converted one of those into a sale that we said we would convert the sale in '15 and we did convert into a sale we said that in the first quarter. I don't have the number in front of me, it was running, here I am going to get it, about the 2%, 2.5%. Somewhere in the neighborhood up 2% to 2.5% of revenue in the current year. So, we do expect that number to grow, we are looking at a few leases in Q1. Weston Twigg: Great. Thank you, very helpful. Brian Smith: Okay. Operator: Thank you. We've reached the end of question-answer session. I like to turn the call back over to management for any further closing comments. S. Kent Rockwell: I'll just reiterate again the visibility that we have on this year is just restrictive enough that we don't want to get into issues of trying to provide guidance and then have a shift dramatically into later quarters. So, we're going to hold to just saying to you that we've got a lot of confidence in where we are going. It's growing, we've got multiple orders for certain customers that know our business and we believe we are going to see substantial growth in this year and we're quite confident with where we are headed. XONE: Okay thanks a lot everybody. That concludes our call and looking forward to next quarter's call. Operator: Thanks. That just conclude our teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.