ExOne - Surprisingly Resilient Despite Soft 3rd Quarter Results

| About: ExOne (XONE)

ExOne (NASDAQ:XONE) hardly moved following the release of its third quarter results, which fell slightly short compared to consensus estimates.

Despite the fact that ExOne missed on high expectations, shares did not see a sell off as the company remains optimistic about the fourth quarter and into 2014.

Third Quarter Results

ExOne generated third quarter revenues of $11.6 million, up 36% compared to the year before. The company faced quite some currency headwinds which shaved off $0.6 million, or 6% revenue growth.

As a result of the currency headwinds, ExOne missed consensus estimates for revenues of $12.2 million.

Net losses narrowed from $5.9 million to $0.2 million, or $0.02 per share. Analysts were looking for ExOne to earn a penny per share.

CEO and Chairman Kent Rockwell commented on the third quarter developments and outlook, "We continue to aggressively execute on our stated strategic plan - increasing machine sales, expanding our production capacity and PSC network, and building our material and binders portfolio. There are many exciting new projects we are involved with globally. As we look forward to 2014, we expect to achieve our long-term growth targets. We believe ExOne remains distinctively positioned as a leading industrial provider of 3D printing machines and printed products."

Looking Into The Results

While topline growth of 36% is not so inspiring, compared to previous quarters, it is worth noting that in constant currencies revenues would have been up by 42%.

Machine revenues were up by 50% to $5.2 million, driven by the sale of four Four S-Max machines. The company furthermore sold 4 other machines, each of a different type range.

Revenues from the production service center were up by 16% to $3.8 million driven by an increased installed machine basis.

Gross margins rose by a full 340 basis points to 45.2% of total sales. Operating earnings totaled $0.3 million, compared to a $5.7 million loss last year. Last year the company took $6.0 million in stock-based compensation charges.

Looking Ahead

For the full year of 2013, ExOne sees revenues at the low end of the previously issued $48 to $52 million guidance. After warning for full year revenues at is second quarter earnings report, analysts already lowered the full year revenue guidance towards $48.2 million.

Gross margins will come in at the high end of the guided 42-46% guidance, as operating expenses will come in at the high end of the $18-$21 million guidance.

The company remains committed to make $40 to $50 million in growth investments in the remainder of 2013 and 2014.

Based on the results so far, the guidance implies that fourth quarter revenues are seen between $19.2 million and $23.2 million. At the low end of the range, revenues are seen up by 51% on the year before.


ExOne ended its third quarter with $115.1 million in cash and equivalents and a modest $3.4 million in debt and financial leases, resulting in a net cash position of around $111 million. Note that ExOne issued 1.1 million shares in September, thereby raising little over $65 million in net proceeds.

Revenues for the first months of the year came in at $28.8 million, up by 81% on the year before. Net losses narrowed from $11.1 million to $3.3 million in the meantime.

Trading around $60 per share, the market values ExOne at $890 million, or operating assets of the firm at $780 million.

ExOne does not pay a dividend at the moment.

Some Historical Perspective

ExOne went public at the start of this year when shares were sold to the general public at $18 per share. Shares immediately jumped up given the momentum of other 3D Systems and printer stocks including 3D Systems (NYSE:DDD) and Stratysys (NASDAQ:SSYS).

Shares ended up trading as high as nearly $80 per share by August to see shares roughly half to their low forties by October. A recovery has send shares towards $60 at the moment.

Despite the rapid growth, annual revenues are only seen around $50 million this year, although losses are set to narrow significantly.

Investment Thesis

Back in August I last took a look at ExOne's prospects after the company released its second quarter results. After shares failed to beat the sky-high expectations, I concluded that shares were priced for perfection and shares have lost another 10% over the past quarter. Within this time period the company used the high valuation to raise fresh capital.

For now the focus is still on the Max platform, of which it sold 4 machines out of total sales of 8 machines. The Print and Flex platform still have to start making meaningful contribution. THe company shipped 1 Print and 1 Flex machine during the quarter.

I still like the fact that ExOne is targeting high-end industrial users with deeper pockets, rather than focusing on the consumer market. Yet any investment now remains very opportunistic given the uncertain future developments and rapidly changing technological landscape.

Those who are in for a gamble can always invest, as long as they realize they can lose the majority of their investment, hoping to find the new "Microsoft" in a decade's time. Traditional value investors have no business getting involved with the stock or the company at this point in time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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