Market Overview

The ExOne Company Reports 2017 Second Quarter Results

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  • Revenue of $10.8 million, impacted by timing but on track
  • 2017 first half realized 22% growth in machine revenue over the
    same period in 2016
  • Backlog grew to $26.3 million
  • Revising 2017 revenue expectations to 20% - 25% growth;
    reiterating expectation for positive Adjusted EBITDA by year end

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 second quarter ended June 30,
2017.

"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.

He continued, "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."

Second Quarter and First Half Revenue – Impacted by Timing

         
Quarter Ended Six Months Ended
June 30, June 30,
(in millions) 2017     2016 2017     2016
Revenue by Product Line                
3D Printing Machines $ 4.3 39 % $ 4.8 41 % $ 8.5 39 % $ 7.0 35 %

3D Printed and Other Products,
Materials and Services

  6.5 61 %   7.0 59 %   13.2 61 %   13.2 65 %
Total Revenue $ 10.8 100 % $ 11.8 100 % $ 21.7 100 % $ 20.2 100 %
 

Consolidated revenue for the 2017 second quarter was down 8% compared
with the prior-year period. Machine revenue was down 11%. Compared with
the 2016 second quarter, there was one less machine sold in the 2017
second quarter. While non-machine revenue was down 6%, by excluding
approximately $0.8 million of second quarter 2016 revenue attributable
to product lines that the Company has exited, the comparable non-machine
revenue grew by 5%. The growth was due to a net increase in sales from
the Company's production service center (PSC) and ExOne adoption center
(EAC) operations, and evidences increased customer acceptance of binder
jet technology.

For the first half of 2017, revenue was up 7% over the 2016 first half.
Machine revenue was up 22%, driven by three more machine sales in the
2017 first half. Excluding approximately $0.8 million of first half 2016
revenue attributable to product lines that the Company has exited, the
comparable non-machine revenue grew by 6%.

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.

Second Quarter Operations – Impacted By Inventory Write-off and
Investments

                 
($ in millions,

except per-share amounts)

Q2 2017 Q2 2016 Change % Change  
Gross profit $ 2.0 $ 3.5 ($1.5 ) (42 %)
Gross margin 18.8 % 29.8 %
Operating loss ($6.3 ) ($3.1 ) ($3.2 ) (104 %)
Net loss ($6.4 ) ($2.9 ) ($3.5 ) (118 %)
Diluted EPS ($0.40 ) ($0.18 ) ($0.22 ) (122 %)
 

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 million charge 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.

Brian Smith, ExOne's Chief Financial Officer, commented, "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."

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 million loss 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.

First Half 2017 Review – Focused On Advancing Technology and Customer
Validation

               

($ in millions,
except per-share amounts)

 

YTD 2017 YTD 2016 Change % Change
Gross profit $ 3.6 $ 5.4 ($1.8 ) (33 %)
Gross margin 16.7 % 26.7 %
Operating loss ($13.0 ) ($8.4 ) ($4.6 ) (54 %)
Net loss ($13.2 ) ($8.4 ) ($4.8 ) (57 %)
Diluted EPS $ (0.82 ) $ (0.53 ) ($0.29 ) (55 %)
 

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.

Capitalization – Cash Impacted by Inventory Build and Technology
Investments

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.

Outlook – Updating Sales Outlook Modestly, Reiterating Adjusted
EBITDA Expectations

Mr. McCarley concluded, "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."

Webcast and Conference Call

ExOne will host a conference call and live webcast on Thursday, August
10 at 8:30 a.m. Eastern Time. During the conference call and webcast,
management will review the financial and operating results for the 2017
second quarter, along with 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 of the conference call will be available from 11:30
a.m. ET on the day of the teleconference through Thursday, August 17,
2017. To listen to a replay of the call, dial (412) 317-6671 and enter
the conference ID number 13665986, or access the webcast replay via the
Company's website, where a transcript will also be posted once available.

About ExOne

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 installed base of 3D printing machines. ExOne's machines serve
direct and indirect applications. Direct printing produces a component;
indirect printing makes a tool to produce a component. ExOne offers
pre-production collaboration and print products for customers through
its network of ExOne Adoption Centers (EACs) and Production Service
Centers (PSCs). ExOne also supplies the associated materials, including
consumables and replacement parts, and other services, including
training and technical support that is necessary for purchasers of its
3D printing machines to print products. The Company believes that its
ability to print in a variety of industrial materials, as well as its
industry-leading volumetric output (as measured by build box size and
printing speed) uniquely position ExOne to serve the needs of industrial
customers.

Safe Harbor Regarding Forward Looking Statements

This news release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act with respect to
the Company's future financial or business performance, strategies, or
expectations. Forward-looking statements typically are identified by
words or phrases such as "trend," "potential," "opportunity,"
"pipeline," "believe," "comfortable," "expect," "anticipate," "current,"
"intention," "estimate," "position," "assume," "outlook," "continue,"
"remain," "maintain," "sustain," "seek," "achieve," as well as similar
expressions, or future or conditional verbs such as "will," "would,"
"should," "could" and "may."

The Company cautions that forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change over time.
Forward-looking statements speak only as of the date they are made and
the Company assumes no duty to and does not undertake to update
forward-looking statements. Actual results could differ materially from
those anticipated in forward-looking statements and future results could
differ materially from historical performance.

In addition to risk factors previously disclosed in the Company's
reports, the following factors, among others, could cause results to
differ materially from forward-looking statements or historical
performance: the Company's ability to enhance its current
three-dimensional ("3D") printing machines and technology and develop
new 3D printing machines; its ability to qualify more industrial
materials in which it can print; timing and length of sales of 3D
printing machines; demand for ExOne products; the Company's ability to
achieve cost savings through consolidation or exiting of certain North
American operations; the impact of increases in operating expenses and
expenses relating to proposed investments and alliances; the
availability of skilled personnel; the impact of market conditions and
other factors on the carrying value of long-lived assets; the Company's
competitive environment and its competitive position; the Company's
ability to continue as a going concern; individual customer contractual
requirements; the impact of customer specific terms in machine sale
agreements on the period in which the Company recognizes revenue; the
impact of loss of key management; risks related to global operations
including effects of foreign currency and risks related to the situation
in the Ukraine and the United Kingdom's referendum to withdraw from the
European Union; demand for aerospace, automotive, heavy equipment,
energy/oil/gas and other industrial products; the Company's plans
regarding increased international operations in additional international
locations; the scope, nature or impact of alliances and strategic
investments and the Company's ability to integrate strategic
investments; sufficiency of funds for required capital expenditures,
working capital, and debt service; the adequacy of sources of liquidity;
the effect of litigation, contingencies and warranty claims; liabilities
under laws and regulations protecting the environment; the impact of
governmental laws and regulations; operating hazards, war, terrorism and
cancellation or unavailability of insurance coverage; the impact of
disruption of our manufacturing facilities, production service centers
or ExOne adoption centers; the adequacy of the Company's protection of
its intellectual property; expectations regarding demand for the
Company's industrial products, operating revenues, operating and
maintenance expenses, insurance expenses and deductibles, interest
expenses, debt levels, and other matters with regard to outlook; and
material weaknesses in the Company's internal control over financial
reporting.

These and other important factors, including those discussed in the
Company's Annual Report on Form 10-K, may cause its actual results of
operations to differ materially from any future results of operations
expressed or implied by the forward-looking statements contained herein.
Before making a decision to purchase ExOne common stock, you should
carefully consider all of the factors identified in its Annual Report on
Form 10-K that could cause actual results to differ from these
forward-looking statements.

FINANCIAL TABLES FOLLOW.

 

The ExOne Company

Statement of Consolidated Operations

(in thousands, except per-share amounts)

(Unaudited)

           
Quarter Ended

June 30,

% Change Six Months Ended

June 30,

% Change
2017   2016 2017   2016
 
Revenue $ 10,799 $ 11,755 (8 %) $ 21,668 $ 20,169 7 %
Cost of sales   8,773     8,249   6 %   18,039     14,787   22 %
Gross profit 2,026 3,506 (42 %) 3,629 5,382 (33 %)
Gross margin 18.8 % 29.8 % 16.7 % 26.7 %
 
Research and development 2,349 1,946 21 % 4,348 3,839 13 %
Selling, general and administrative   6,013     4,663   29 %   12,276     9,988   23 %
  8,362     6,609   27 %   16,624     13,827   20 %
Operating loss (6,336 ) (3,103 ) (104 %) (12,995 ) (8,445 ) (54 %)
 
Interest expense 23 22 5 % 45 254 (82 %)
Other expense (income) – net   35     (205 ) NM   145     (298 ) NM
  58     (183 ) NM   190     (44 ) NM
Loss before income taxes (6,394 ) (2,920 ) (119 %) (13,185 ) (8,401 ) (57 %)
 
Provision for income taxes   9     22   (59 %)   9     18   (50 %)
 
Net loss $ (6,403 ) $ (2,942 ) (118 %) $ (13,194 ) $ (8,419 ) (57 %)
 
 
Net loss per common share:
Basic $ (0.40 ) $ (0.18 ) (122 %) $ (0.82 ) $ (0.53 ) (55 %)
Diluted $ (0.40 ) $ (0.18 ) (122 %) $ (0.82 ) $ (0.53 ) (55 %)
 
Weighted average shares outstanding (basic and diluted) 16,046 15,994 16,037 15,870
 

NM: Not Meaningful

 
 

The ExOne Company

Consolidated Balance Sheet

(in thousands, except per-share and share amounts)

(Unaudited)

       
June 30,

2017

December 31,

2016

 
Assets
Current assets:
Cash and cash equivalents $ 24,051 $ 27,825
Restricted cash 1,112 330
Accounts receivable - net of allowance of $1,687 (2017) and $1,566
(2016)
6,566 6,447
Inventories - net 17,022 15,838
Prepaid expenses and other current assets   2,059     1,159  
Total current assets 50,810 51,599
Property and equipment - net 49,011 51,134
Intangible assets - net 236 668
Other noncurrent assets   304     777  
Total assets $ 100,361  

 

$ 104,178  
 
Liabilities
Current liabilities:
Current portion of long-term debt $ 133 $ 132
Current portion of capital leases 41 72
Accounts payable 4,365 2,036
Accrued expenses and other current liabilities 5,120 5,124
Deferred revenue and customer prepayments   10,539     7,371  
Total current liabilities 20,198

 

14,735
Long-term debt - net of current portion 1,578 1,644
Capital leases - net of current portion 44 10
Other noncurrent liabilities   9     9  
Total liabilities 21,829 16,398
Contingencies and commitments
Stockholders' equity
Common stock, $0.01 par value, 200,000,000 shares authorized,
16,045,949 (2017)
and 16,017,115 (2016) shares issued and outstanding 160 160
Additional paid-in capital 171,951 171,116
Accumulated deficit (82,363 ) (68,761 )
Accumulated other comprehensive loss   (11,216 )   (14,735 )
Total stockholders' equity   78,532     87,780  
Total liabilities and stockholders' equity $ 100,361   $ 104,178  
 
     

The ExOne Company

Statement of Consolidated Cash Flows

(in thousands)

(Unaudited)

 
Six Months Ended
June 30,
2017   2016
 
Operating activities
Net loss $ (13,194 ) $ (8,419 )
Adjustments to reconcile net loss to net cash used for operations:
Depreciation and amortization 3,589 2,862
Equity-based compensation 835 554
Amortization of debt issuance costs 3 207
Deferred income taxes - (29 )
Provision (recoveries) for bad debts - net 132 (271 )
Provision (recoveries) for slow-moving, obsolete and lower of cost
or market inventories - net
1,835 (403 )
(Gain) loss from disposal of property and equipment - net (314 ) 198
Changes in assets and liabilities, excluding effects of foreign
currency translation adjustments:
Decrease in accounts receivable 69 4,652
Increase in inventories (3,358 ) (545 )
(Increase) decrease in prepaid expenses and other assets (770 ) 820
Increase in accounts payable 2,111 208
Decrease in accrued expenses and other liabilities (252 ) (1,551 )
Increase in deferred revenue and customer prepayments   2,390     1,550  
Net cash used for operating activities (6,924 ) (167 )
 
Investing activities
Capital expenditures (392 ) (331 )
Proceeds from sale of property and equipment   3,677     44  
Net cash provided by (used) for investing activities 3,285 (287 )
 
Financing activities
Net proceeds from issuance of common stock - registered direct
offering to a related party
- 12,447
Net proceeds from issuance of common stock - at the market offerings - 595
Payments on long-term debt (68 ) (68 )
Payments on capital leases   (45 )   (41 )
Net cash (used for) provided by financing activities (113 ) 12,933
 
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
  760     63  
Net change in cash, cash equivalents, and restricted cash (2,992 ) 12,542
Cash, cash equivalents, and restricted cash at beginning of period   28,155     19,672  
 
Cash, cash equivalents, and restricted cash at end of period $ 25,163   $ 32,214  
 
Supplemental disclosure of noncash investing and financing
activities
Transfer of internally developed 3D printing machines from
inventories to property and
equipment for internal use or leasing activities $ 1,917   $ 1,997  
Transfer of internally developed 3D printing machines from property
and equipment to
inventories for sale $ 395   $ 682  
Property and equipment included in accounts payable $ 100   $ 20  
Property and equipment acquired through financing arrangements $ 48   $ -  
 
 

The ExOne Company

Additional Information

(Unaudited)

 

Machine Sales by Type

         
Quarter Ended

June 30,

Six Months Ended

June 30,

2017   2016 2017   2016
S-Max+™ - - - 1
S-Max® 2 1 6 1
S-Print® - 2 - 2
S-15™ - 1 - 1
M-Flex® 3 2 4 2
Innovent® 3 3 3 3
8 9 13 10
 
 

The ExOne Company

Adjusted EBITDA Reconciliation

(in millions)

(Unaudited)

           
Quarter Ended

June 30,

Six Months Ended

June 30,

2017 2016 2017 2016
 
Net loss $ (6.4 ) $ (2.9 ) $ (13.2 ) $ (8.4 )
 
Interest expense 0.0 0.0 0.1 0.2
Provision for income taxes 0.0 0.0 0.0 0.0
Depreciation and amortization 1.3 1.5 3.6 2.9
Equity-based compensation 0.3 0.2 0.8 0.6
Other expense (income) - net   0.0     (0.2 )   0.1     (0.3 )
Adjusted EBITDA $ (4.8 ) $ (1.4 ) $ (8.6 ) $ (5.0 )
 

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, provision for income taxes, depreciation and
amortization, equity-based compensation, and other expense (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 results. 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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