Gross profit and gross margin for the 2016 first nine months significantly improved compared with the prior year. The 2016 period was driven by higher volume, especially large, indirect machine sales, the reversal of a $0.5 million reserve for obsolete and slow-moving inventory upon the sale of those inventory items recorded in the second quarter, and improved efficiencies. As noted for the quarter, the 2015 year-to-date period also included costs associated with the Company’s expanded global facilities integration as well as its ERP system implementation.
Operating loss improved for the 2016 first nine months compared with the 2015 period primarily due to higher gross profit and lower SG&A expenses, as well as the impact of a goodwill impairment charge recorded in the prior year. SG&A for the 2016 first nine months was $15.2 million, down $2.3 million, or 13%, compared with the prior-year period primarily due to lower bad debt, professional, consulting and trade show expenses. R&D expense was $5.7 million in the 2016 first nine months compared with $5.2 million in the 2015 period, with the increase reflecting project-related material costs.
Adjusted EBITDA improved to a $6.6 million loss in the first nine months of 2016, compared with a $15.4 million loss in last year’s period. 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 quarters and nine months ended September 30, 2016 and 2015.
Capitalization – Modest Cash Usage in Quarter
Cash and cash equivalents as of September 30, 2016 were $29.8 million, down from $31.9 million at June 30, 2016 and up from $19.3 million at December 31, 2015. The decrease in cash during the third quarter was primarily due to cash used for operating activities of $1.7 million. Cash used in operations was $1.9 million for the 2016 year-to-date period. Cash used for operating activities during the third quarter of 2015 and year-to-date period was $2.9 million and $11.0 million, respectively. Cash capital expenditures were $0.7 million for the first nine months of 2016 compared with $4.1 million for the first nine months of 2015.
Webcast and Conference Call
ExOne will host a conference call and live webcast on Thursday, November 10 at 8:30 a.m. Eastern Time. During the conference call and webcast, management will review the financial and operating results for the 2016 third 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, November 17, 2016. To listen to a replay of the call, dial (858) 384-5517 and enter the conference ID number 13645497, 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 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 printing capacity (as measured by build box size and printhead speed) uniquely position ExOne to serve the needs of industrial customers.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time and are typically 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 conditional verbs such as “will,” “would,” “should,” “could” and “may.” Such statements include, but are not limited to, statements concerning future revenue and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements and from historical performance, which include: timing and length of sales of three dimensional printing machines; risks related to global operations including effects of foreign currency and risks related to the situation in the Ukraine; our ability to qualify more industrial materials in which we can print; the availability of skilled personnel; the impact of increases in operating expenses and expenses relating to proposed investments and alliances; our strategy, including the expansion and growth of our operations; the impact of loss of key management; our plans regarding increased international operations in additional international locations; sufficiency of funds for required capital expenditures, working capital, and debt service; the adequacy of sources of liquidity; expectations regarding demand for our industrial products, operating revenues, operating and maintenance expenses, insurance expenses and deductibles, interest expenses, debt levels, and other matters with regard to outlook; demand for aerospace, automotive, heavy equipment, energy/oil/gas and other industrial products; individual customer contractual requirements; the scope, nature or impact of alliances and strategic investments and our ability to integrate strategic investments; 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 effect of litigation and contingencies; the impact of disruption of our manufacturing facilities or PSCs; the adequacy of our protection of our intellectual property; material weaknesses in our internal control over financial reporting; the impact of customer specific terms in machine sale agreements on the period in which we recognize revenue; the impact of market conditions and other factors on the carrying value of long-lived assets; the potential impact of the results from the United Kingdom’s referendum on its withdrawal from the European Union; and our ability to continue as a going concern and other factors disclosed in the Company’s Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Because they are forward-looking, these statements should be evaluated in light of important risk factors and uncertainties.
FINANCIAL TABLES FOLLOW.
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The ExOne Company
Statement of Consolidated Operations (in thousands, except per-share amounts) (Unaudited) | ||||||||||||||||||||||
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Quarter Ended
September 30, | % Change |
Nine Months Ended
September 30, | % Change | |||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
| Revenue | ||||||||||||||||||||||
| Revenue - third parties | $ | 12,987 | $ | 8,712 | 49 | % | $ | 33,084 | $ | 22,861 | 45 | % | ||||||||||
| Revenue - related parties | 1 | 152 | (99 | %) | 73 | 1,294 | (94 | %) | ||||||||||||||
| 12,988 | 8,864 | 47 | % | 33,157 | 24,155 | 37 | % | |||||||||||||||
| Cost of sales | 9,428 | 7,695 | 23 | % | 24,215 | 21,881 | 11 | % | ||||||||||||||
| Gross profit | 3,560 | 1,169 | 205 | % | 8,942 | 2,274 | 293 | % | ||||||||||||||
| Gross margin | 27.4 | % | 13.2 | % | 27.0 | % | 9.4 | % | ||||||||||||||
| Research and development | 1,898 | 1,825 | 4 | % | 5,737 | 5,218 | 10 | % | ||||||||||||||
| Selling, general and administrative | 5,234 | 5,018 | 4 | % | 15,222 | 17,479 | (13 | %) | ||||||||||||||
| Goodwill impairment | - | 4,419 | (100 | %) | - | 4,419 | (100 | %) | ||||||||||||||
| 7,132 | 11,262 | (37 | %) | 20,959 | 27,116 | (23 | %) | |||||||||||||||
| Loss from operations | (3,572 | ) | (10,093 | ) | 65 | % | (12,017 | ) | (24,842 | ) | 52 | % | ||||||||||
| Interest expense | 22 | 29 | (24 | %) | 276 | 87 | 217 | % | ||||||||||||||
| Other (income) expense – net | (8 | ) | (4 | ) | 100 | % | (306 | ) | (83 | ) | 269 | % | ||||||||||
| 14 | 25 | (44 | %) | (30 | ) | 4 | NM | |||||||||||||||
| Loss before income taxes | (3,586 | ) | (10,118 | ) | 65 | % | (11,987 | ) | (24,846 | ) | 52 | % | ||||||||||
| Provision (benefit) for income taxes | 25 | (41 | ) | NM | 43 | (200 | ) | NM | ||||||||||||||
| Net loss | $ | (3,611 | ) | $ | (10,077 | ) | 64 | % | $ | (12,030 | ) | $ | (24,646 | ) | 51 | % | ||||||
| Net loss per common share: | ||||||||||||||||||||||
| Basic | $ | (0.23 | ) | $ | (0.70 | ) | 67 | % | $ | (0.76 | ) | $ | (1.71 | ) | 56 | % | ||||||
| Diluted | $ | (0.23 | ) | $ | (0.70 | ) | 67 | % | $ | (0.76 | ) | $ | (1.71 | ) | 56 | % | ||||||
| Weighted average shares outstanding (basic and diluted) | 15,997 | 14,429 | 15,913 | 14,427 | ||||||||||||||||||
