The ExOne Company Reports 2019 First Quarter Results

  • Expanded gross margin to 27.6% on sales of $9.6 million
  • A 13% decrease in operating expenses and improved gross margin
    drove significant reduction in net loss
  • Backlog increased to $18.8 million; Supports expectations for
    solid second quarter and full-year revenue growth
  • Reconfirming 2019 goals of mid-teen revenue growth and positive
    Adjusted EBITDA* for the year

    • Distribution of revenue expected to approximate 35%/65% for
      1H/2H 2019

NORTH HUNTINGDON, Pa.–(BUSINESS WIRE)–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 first quarter ended March 31,
2019.

S. Kent Rockwell, ExOne’s Chairman and Chief Executive Officer, stated,
Order activity started strong this year, building backlog in support of
our expectations for robust revenue growth for 2019 and reinforcing our
excitement around the building momentum for our binder jetting printing
technology. As we told you in March, our revenue in the first quarter
was below last year’s first quarter as a result of timing, and we remain
confident in our outlook for a strong second quarter. Importantly, our
focus on profitable growth is demonstrated in the measurable reduction
in operating expenses and we expect to realize strong operating leverage
as we grow through the year.”

He added, “We are enthusiastic about our ongoing new product development
efforts. Our new X1 25PRO™ larger format fine powder direct printing
machine is receiving positive reviews during beta tests. Additionally,
development of our new advanced indirect machine is progressing well. We
continue to work closely with customers to identify innovative
application opportunities, to further the adoption of binder jetting
technology for additive manufacturing.”

                     

First Quarter Revenue – Impacted by Customer Timing

 
Quarter Ended
(in millions) March 31,
Revenue by Product Line 2019 2018 % Change
3D Printing Machines $ 3.3 35 % $ 4.5 38 % (26 %)

3D Printed and Other Products,

Materials and Services (“Recurring”)

  6.3 65 %   7.4 62 % (15 %)
Total Revenue $ 9.6 100 % $ 11.9 100 % (19 %)
 

*See the attached table captioned “Adjusted EBITDA Reconciliation” for
an explanation of how ExOne calculates Adjusted EBITDA (non-GAAP) from
net loss (most directly comparable GAAP measure).

Consolidated revenue for the 2019 first quarter was $9.6 million and
impacted by shipment/acceptance timing as well as $0.4 million due to
unfavorable currency exchange rates.

Machine revenue was $3.3 million in the first quarter of 2019, down from
the prior-year period, reflecting the impact of timing and product mix.
In the 2019 first quarter, eight machines were sold, of which two were
indirect and six were direct printing machines. This compares with six
machines sold in the 2018 first quarter, consisting of three indirect
and three direct printing machines.

Recurring revenue (3D printed and other products, materials and
services) was $6.3 million in the first quarter of 2019, compared with
$7.4 million in the first quarter of 2018. The decrease was primarily
due to a lower volume of printing projects at the Company’s direct and
indirect service centers, including the impact of the Company’s exit
from its Houston facility.

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.

                 

First Quarter Operations – Realizing Production Efficiency and
Operating Leverage

(compared with the prior-year period unless stated otherwise)

 
($ in millions, except per-share amounts) Q1 2019 Q1 2018 Change % Change
Gross profit $ 2.6 $ 2.6 $ 0.0 1 %
Gross margin 27.6 % 22.0 %
Operating loss $ (5.2 ) $ (6.4 ) $ 1.2 18 %
Net loss $ (4.5 ) $ (6.4 ) $ 1.9 30 %
Diluted EPS $ (0.28 ) $ (0.40 ) $ 0.12 30 %
 

Gross profit was $2.6 million in the 2019 first quarter, while gross
margin expanded 560 basis points to 27.6% compared with the same period
in 2018. The 2019 quarter benefited from improved operating leverage, as
well as a reduction in fixed costs resulting from the 2018 global cost
realignment initiative.

R&D expense of $2.4 million for the quarter was down $0.4 million, or
13%, compared with the 2018 first quarter, primarily from efficiencies
gained from the 2018 global cost realignment initiative and improved
resource allocation to maintain strong progress in advancing the
Company’s technology.

SG&A expense of $5.4 million was down $0.8 million, or 13%, compared
with the 2018 first quarter, also benefiting from the 2018 global cost
realignment initiative.

ExOne realized a $0.8 million tax benefit for the quarter resulting from
the completion of a tax examination.

Net loss for the quarter was $4.5 million, or $0.28 per share, compared
with a $6.4 million net loss, or $0.40 loss per share, in the first
quarter of 2018. The $1.9 million improvement was driven primarily by
the Company’s new cost model.

Adjusted earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”), a non-GAAP measure, was a $3.6 million loss in the
2019 first quarter, compared with a $4.5 million loss in last year’s
first 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 table captioned “Adjusted EBITDA Reconciliation”
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 March 31, 2019 and
2018.

Capitalization – Operating Cash Flow Improves

Cash, cash equivalents and restricted cash as of March 31, 2019 were
$7.3 million, compared with $9.1 million at December 31, 2018. There
were no borrowings outstanding on the Company’s $15 million credit
facility as of March 31, 2019 or December 31, 2018.

Cash used for operating activities during the first quarter of 2019 was
$1.4 million, compared with $4.8 million in the first quarter of 2018.
The $3.4 million decrease was driven by a lower net loss and improved
working capital.

Cash capital expenditures were $0.4 million and $0.5 million in 2019 and
2018 first quarters, respectively. In 2019, the Company expects cash
capital expenditures of $1 million to $2 million.

Reconfirming 2019 Goals – Revenue Growth Rate in Mid-Teens, Positive
Adjusted EBITDA

Mr. Rockwell concluded, “Our visibility into order activity and our
improved operating model give us confidence in reconfirming our
previously stated 2019 goals for mid-teen revenue growth and positive
Adjusted EBITDA. In addition, as we have previously discussed, we are
targeting revenue growth at increasing rates over each of the next
several years. Importantly, we believe we have sufficient capital to
execute our plans. We will continue to invest in innovative new
opportunities in a cost efficient manner, advancing our market-leading
position in binder jetting technology.”

The Company expects 2019 revenue to be distributed approximately 35% in
the first half of the year and 65% in the second half.

Webcast and Conference Call

ExOne will host a conference call and live webcast on Thursday, May 9,
2019 at 8:30 a.m. Eastern Time. During the conference call and webcast,
management will review the financial and operating results for the 2019
first quarter, along with ExOne’s corporate strategies and outlook. A
question-and-answer session will follow. The teleconference can be
accessed by calling (631) 891-4304. 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. Eastern Time on the day of the teleconference through Thursday, May
16, 2019. To listen to a replay of the call, dial (412) 317-6671 and
enter the conference ID number 10006586, 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”). 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,” “goal,” “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
filings with the U.S. Securities and Exchange Commission (the “SEC”),
including its Annual Report on Form 10-K, the following factors, among
others, could cause results to differ materially from forward-looking
statements or historical performance: the Company’s ability to
consistently generate operating profits; fluctuations in the Company’s
revenues and operating results; the Company’s competitive environment
and its competitive position; ExOne’s ability to enhance its current
three-dimensional (“3D”) printing machines and technology and develop
new 3D printing machines; the Company’s ability to qualify more
industrial materials in which it can print; demand for ExOne’s products;
the availability of skilled personnel; the impact of loss of key
management; the impact of market conditions and other factors on the
carrying value of long-lived assets; the Company’s ability to continue
as a going concern; the impact of customer specific terms in machine
sale agreements on the period in which the Company recognizes revenue;
risks related to global operations including effects of foreign
currency; the adequacy of sources of liquidity; the amount and
sufficiency of funds for required capital expenditures, working capital,
and debt service; dependency on certain critical suppliers; nature or
impact of alliances and strategic investments; reliance on critical
information technology systems; 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 the Company’s
manufacturing facilities or EACs; the adequacy of ExOne’s protection of
its intellectual property; and 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.

These and other important factors, including those discussed in the
Company’s Annual Report on Form 10-K, may cause the Company’s actual
results of operations to differ materially from any future results of
operations expressed or implied by the forward-looking statements
contained therein. 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 and other SEC filings 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 %

March 31

Change
  2019         2018  
Revenue $ 9,579 $ 11,893 (19 %)
Cost of sales   6,937     9,277   (25 %)
Gross profit 2,642 2,616 1 %
Gross margin 27.6 % 22.0 %
Research and development 2,432 2,795 (13 %)
Selling, general and administrative   5,423     6,202   (13 %)
Operating expenses   7,855     8,997   (13 %)
Operating loss (5,213 ) (6,381 ) 18 %
Interest expense 71 33 115 %
Other expense (income) ̶ net   12     (46 ) NM
  83     (13 ) NM
Loss before income taxes (5,296 ) (6,368 ) 17 %
(Benefit) provision for income taxes   (800 )   17   NM
Net loss $ (4,496 ) $ (6,385 ) 30 %
Net loss per common share:
Basic $ (0.28 ) $ (0.40 ) 30 %
Diluted $ (0.28 ) $ (0.40 ) 30 %
Weighted average shares outstanding (basic and diluted) 16,253 16,139
 

NM: Not Meaningful

 
         

The ExOne Company

Consolidated Balance Sheet

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

(Unaudited)

 
March 31, December 31,
  2019     2018  
Assets
Current assets:
Cash and cash equivalents $ 5,446 $ 7,592
Restricted cash 1,896 1,548
Accounts receivable ̶ net 3,546 6,393
Current portion of net investment in sales-type leases 287 302
Inventories ̶ net 16,361 15,930
Prepaid expenses and other current assets   2,917     2,438  
Total current assets 30,453 34,203
Property and equipment ̶ net 41,356 41,906
Net investment in sales-type leases ̶ net of current portion 1,272 1,351
Other noncurrent assets   537     222  
Total assets $ 73,618   $ 77,682  
Liabilities
Current liabilities:
Current portion of long-term debt $ 147 $ 144
Accounts payable 3,488 4,376
Accrued expenses and other current liabilities 4,397 6,049
Current portion of contract liabilities   5,573     2,343  
Total current liabilities 13,605 12,912
Long-term debt ̶ net of current portion 1,326 1,364
Contract liabilities ̶ net of current portion 352 527
Other noncurrent liabilities   296     104  
Total liabilities 15,579 14,907
Contingencies and commitments

Stockholders’ equity

Common stock, $0.01 par value, 200,000,000 shares authorized,

16,284,948 (2019) and 16,234,201 (2018) shares issued and
outstanding

163 162
Additional paid-in capital 175,749 175,214

Accumulated deficit

(106,349 ) (101,853 )
Accumulated other comprehensive loss   (11,524 )   (10,748 )
Total stockholders’ equity   58,039     62,775  
Total liabilities and stockholders’ equity $ 73,618   $ 77,682  
 
     

The ExOne Company

Statement of Consolidated Cash Flows

(in thousands)

(Unaudited)

 
Quarter Ended
March 31,
  2019         2018  
Operating activities
Net loss $ (4,496 ) $ (6,385 )
Adjustments to reconcile net loss to net cash used for operations:
Depreciation and amortization 1,165 1,488
Equity-based compensation 439 379
Amortization of debt issuance costs 23 5
(Recoveries) provision for bad debts ̶ net (73 ) 9
Provision for slow-moving, obsolete and lower of cost or net
realizable value

inventories ̶ net

107 16
Loss from disposal of property and equipment ̶ net 9
Changes in assets and liabilities, excluding effects of foreign
currency

translation adjustments:

Decrease in accounts receivable 2,877 3,467
Decrease in net investment in sales-type leases 87 51
Increase in inventories (1,576 ) (3,486 )
Increase in prepaid expenses and other assets (509 ) (1,351 )
(Decrease) increase in accounts payable (793 ) 1,244
Decrease in accrued expenses and other liabilities (1,748 ) (511 )
Increase in contract liabilities   3,122     219  
Net cash used for operating activities (1,375 ) (4,846 )
Investing activities
Capital expenditures (347 ) (483 )
Proceeds from sale of property and equipment       25  
Net cash used for investing activities (347 ) (458 )
Financing activities
Payments on long-term debt (36 ) (35 )
Proceeds from exercise of employee stock options 165
Taxes related to the net share settlement of equity-based awards (68 )
Debt issuance costs (188 )
Other   (5 )   (4 )
Net cash provided by (used for) financing activities 56 (227 )
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
  (132 )   209  
Net change in cash, cash equivalents, and restricted cash (1,798 ) (5,322 )
Cash, cash equivalents, and restricted cash at beginning of period   9,140     22,178  
Cash, cash equivalents, and restricted cash at end of period $ 7,342   $ 16,856  
 
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

$ 819   $ 814  
Transfer of internally developed 3D printing machines from property
and equipment to inventories for sale
$   $ 113  
Property and equipment included in accounts payable $ 23   $ 49  
Property and equipment included in accrued expenses and other
current liabilities
$ 7   $ 50  
Property and equipment acquired through financing arrangements $   $ 14  
Debt issuance costs included in accrued expenses and other current
liabilities
$   $ 76  
 
         

The ExOne Company

Additional Information

(Unaudited)

 
Quarter Ended
March 31,
2019 2018
3D printing machine units sold:
Direct 6 3
Indirect 2 3
8 6
 
         

The ExOne Company

Adjusted EBITDA Reconciliation

(in millions)

(Unaudited)

 
Quarter Ended
March 31,
  2019     2018  
Net loss $ (4.5 ) $ (6.4 )
Interest expense 0.1 0.0
(Benefit) provision for income taxes (0.8 ) 0.0
Depreciation and amortization 1.2 1.5
Equity-based compensation 0.4 0.4
Other expense (income) ̶ net   0.0     (0.0 )
Adjusted EBITDA $ (3.6 ) $ (4.5 )
 

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, equity-based compensation, and other
expense (income) – net. Use of Adjusted EBITDA, which is a non-GAAP
financial measure, as defined under SEC rules, is intended as a
supplemental measure of ExOne’s performance that is not required by, or
presented in accordance with, GAAP. The presentation of Adjusted EBITDA
is not intended to be a substitute for, and should not be considered in
isolation from, net income (loss) reported 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.

Contacts

Brian Smith
Senior Vice President – Corporate Development
(724)
765-1350

brian.smith@exone.com

Deborah
K. Pawlowski / Karen L. Howard
Kei Advisors LLC
(716)
843-3908 / (716) 843-3942

dpawlowski@keiadvisors.com
/ khoward@keiadvisors.com

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