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3D Systems Reports Third Quarter 2017 Financial Results

ROCK HILL, S.C., Oct. 31, 2017 /PRNewswire/ -- 3D Systems Corporation (NYSE: DDD) announced today its financial results for the third quarter and nine months ended September 30, 2017.

For the third quarter of 2017, the company reported revenue of $152.9 million compared to $156.4 million in the third quarter of the previous year. The company reported a third quarter GAAP loss of $0.34 per share compared to a loss of $0.19 per share in the prior year and a non-GAAP loss of $0.20 per share compared to non-GAAP earnings of $0.14 per share in the third quarter of 2016.

"While third quarter results did not meet our expectations, we believe actions taken during the quarter both organizationally and operationally better position the company for long term success," commented Vyomesh Joshi (VJ), Chief Executive Officer, 3D Systems. "During the quarter, we reorganized the go to market team, changing key leadership positions in both the Americas and the Asia Pacific region while shifting to a worldwide go to market structure. We also completed a deep and comprehensive review of our portfolio based on year to date demand, market trends and a solid understanding of where we meet and will continue to meet customers' expectations."

Demand from healthcare and industrial customers as well as strong execution in EMEA was more than offset by softer sales in the Americas and Asia Pacific regions.

The company reported gross profit margin of 38.3% for the third quarter of 2017, which included a $12.9 million charge to write down products and parts as a result of a comprehensive review of the portfolio and inventory. Gross profit margin in the third quarter of 2016 was 44.1%, which included $10.7 million of expenses related to discontinuation of projects and products.

For the third quarter of 2017, operating expenses were $90.9 million compared to $91.0 million in the prior year. SG&A expenses increased 3% to $66.5 million, which included continued investment in go to market and IT transformation. R&D expenses decreased 7% over the third quarter of 2016 to $24.4 million. The third quarter of 2017 included accelerated investments in printers, materials and software for both plastic and metal solutions in support of products the company plans to launch over the next several months. R&D expenses in the third quarter of 2016 included $6.1 million of expenses related to portfolio realignment and discontinuation of projects.

"We continued with our strategic investments in IT, go to market, quality, reliability and innovation, which we believe are critical to the company to drive long term growth," commented John McMullen, Executive Vice President and Chief Financial Officer. "While we are reducing expenses where appropriate, we continue to be focused on actions and decisions we believe are necessary to best-position the company for long term success."

During the quarter, the company used $0.7 million of cash in operations and ended the quarter with $138.3 million of cash on hand.

For the first nine months of 2017, revenue increased $1.8 million to $468.8 million compared to $467.0 million in the first nine months of 2016. The company reported a GAAP loss of $0.50 per share for the first nine months of 2017 compared to a loss of $0.39 per share in the same period of the prior year and reported a non-GAAP loss of $0.06 per share in the first nine months of 2017 compared to a non-GAAP earnings of $0.31 per share in the same period of 2016.

"We have increased investments and resources to resolve legacy quality and reliability issues faster and have implemented organizational changes to continue to improve execution. We have made significant progress in many areas over the first nine months of this year and are taking additional actions necessary to position the company for long term success. At the same time, we continue to innovate for the future, and plan to bring to market a series of new and exciting products over the coming months," concluded Joshi.

Full Year 2017 Guidance
Management is focused on building the company for long term growth, profitability and success. This includes significant transformational work in solving for legacy issues while at the same time addressing current and go forward execution. Predictability has been difficult in this environment, and therefore, management believes it is prudent to withdraw guidance at this time.

Q3 2017 Conference Call and Webcast
The company expects to file its Form 10-Q for the quarter ended September 30, 2017 with the Securities and Exchange Commission on October 31, 2017. 3D Systems plans to hold a conference call and simultaneous webcast to discuss these results on Tuesday, October 31, 2017, at 4:30 p.m. Eastern Time.

Date: Tuesday, October 31, 2017
Time: 4:30 p.m. Eastern Time
Listen via Internet: www.3dsystems.com/investor
Participate via telephone:
Within the U.S.: 1-877-407-8291
Outside the U.S.: 1-201-689-8345

The recorded webcast will be available beginning approximately two hours after the live presentation at www.3dsystems.com/investor.

Forward-Looking Statements
Certain statements made in this release that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In many cases, forward looking statements can be identified by terms such as "believes," "belief," "expects," "may," "will," "estimates," "intends," "anticipates" or "plans" or the negative of these terms or other comparable terminology. Forward-looking statements are based upon management's beliefs, assumptions and current expectations and may include comments as to the company's beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors described under the headings "Forward-Looking Statements" and "Risk Factors" in the company's periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements. Although management believes that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at which such performance or results will be achieved. The forward-looking statements included are made only as the date of the statement. 3D Systems undertakes no obligation to update or review any forward-looking statements made by management or on its behalf, whether as a result of future developments, subsequent events or circumstances or otherwise.

Presentation of Information in This Press Release
To facilitate a better understanding of the impact that strategic acquisitions, non-recurring charges and certain non-cash expenses had on its financial results, the company reported non-GAAP measures excluding the impact of amortization of intangibles, non-cash interest expense, acquisition and severance expenses, stock-based compensation expense, litigation settlements and charges related to strategic decisions and portfolio realignment. A reconciliation of GAAP to non-GAAP results is provided in the accompanying schedule.

About 3D Systems
3D Systems provides comprehensive 3D products and services, including 3D printers, print materials, on-demand manufacturing services and digital design tools. Its ecosystem supports advanced applications from the product design shop to the factory floor to the operating room. 3D Systems' precision healthcare capabilities include simulation, Virtual Surgical Planning, and printing of medical and dental devices as well as patient-specific surgical instruments. As the originator of 3D printing and a shaper of future 3D solutions, 3D Systems has spent its 30 year history enabling professionals and companies to optimize their designs, transform their workflows, bring innovative products to market and drive new business models.

More information on the company is available at www.3dsystems.com

Tables Follow


3D Systems Corporation

Unaudited Condensed Consolidated Balance Sheets

September 30, 2017 and December 2016

















September 30,


December 31,

(in thousands, except par value)


2017


2016

ASSETS







Current assets:







Cash and cash equivalents


$

138,332


$

184,947

Accounts receivable, net of reserves — $11,607 (2017) and $12,920 (2016)



122,420



127,114

Inventories



100,578



103,331

Prepaid expenses and other current assets



21,344



17,558

Total current assets



382,674



432,950

Property and equipment, net



91,473



79,978

Intangible assets, net



106,632



121,501

Goodwill



227,820



181,230

Long term deferred income tax asset



5,173



8,123

Other assets, net



27,602



25,371

Total assets


$

841,374


$

849,153

LIABILITIES AND EQUITY







Current liabilities:







Current portion of capitalized lease obligations


$

632


$

572

Accounts payable



46,388



40,514

Accrued and other liabilities



55,866



49,968

Customer deposits



5,249



5,857

Deferred revenue



37,311



33,494

Total current liabilities



145,446



130,405

Long term portion of capitalized lease obligations



7,230



7,587

Long term deferred income tax liability



16,644



17,601

Other liabilities



48,529



57,988

Total liabilities



217,849



213,581

Redeemable noncontrolling interests



8,872



8,872

Commitments and contingencies







Stockholders' equity:







Common stock, $0.001 par value, authorized 220,000 shares; issued 115,798 (2017)
and 115,113 (2016)



115



115

Additional paid-in capital



1,320,074



1,307,428

Treasury stock, at cost — 1,982 shares (2017) and 1,498 shares (2016)



(7,153)



(2,658)

Accumulated deficit



(667,638)



(621,787)

Accumulated other comprehensive loss



(27,706)



(53,225)

Total 3D Systems Corporation stockholders' equity



617,692



629,873

Noncontrolling interests



(3,039)



(3,173)

Total stockholders' equity



614,653



626,700

Total liabilities, redeemable noncontrolling interests and stockholders' equity


$

841,374


$

849,153








3D Systems Corporation

Unaudited Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss)

Quarter and Nine Months Ended September 30, 2017 and 2016


















































Quarter Ended
September 30,


Nine Months Ended
September 30,

(in thousands, except per share amounts)

2017


2016


2017


2016

Revenue:












Products

$

87,626


$

94,543


$

276,777


$

280,406

Services


65,281



61,819



192,028



186,622

Total revenue


152,907



156,362



468,805



467,028

Cost of sales:












Products


59,467



56,321



150,769



146,682

Services


34,918



31,104



98,655



93,485

Total cost of sales


94,385



87,425



249,424



240,167

Gross profit


58,522



68,937



219,381



226,861

Operating expenses:












Selling, general and administrative


66,497



64,814



195,990



202,009

Research and development


24,360



26,140



71,661



67,345

Total operating expenses


90,857



90,954



267,651



269,354

Loss from operations


(32,335)



(22,017)



(48,270)



(42,493)

Interest and other income, net


(1,257)



(1,624)



(123)



(1,290)

Loss before income taxes


(33,592)



(23,641)



(48,393)



(43,783)

Provision (benefit) for income taxes


3,723



(2,214)



6,831



665

Net loss


(37,315)



(21,427)



(55,224)



(44,448)

Less: net income (loss) attributable to noncontrolling interests


355



(214)



833



(799)

Net loss attributable to 3D Systems Corporation

$

(37,670)


$

(21,213)


$

(56,057)


$

(43,649)













Net loss per share available to 3D Systems Corporation common stockholders — basic and diluted

$

(0.34)


$

(0.19)


$

(0.50)


$

(0.39)













Other comprehensive income (loss):












Pension adjustments, net of taxes

$

(24)


$

18


$

(105)


$

54

Foreign currency translation gain


4,904



4,282



25,785



5,567

Total other comprehensive income (loss)


4,880



4,300



25,680



5,621

Less foreign currency translation gain attributable
to noncontrolling interests


26



22



161



68

Other comprehensive income (loss) attributable to
3D Systems Corporation


4,854



4,278



25,519



5,553













Comprehensive income (loss)


(32,435)



(17,127)



(29,544)



(38,827)

Less comprehensive income (loss) attributable to
noncontrolling interests


381



(192)



994



(731)

Comprehensive income (loss) attributable to 3D Systems Corporation

$

(32,816)


$

(16,935)


$

(30,538)


$

(38,096)













3D Systems Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2017 and 2016


























Nine Months Ended September 30,

(In thousands)


2017



2016

Cash flows from operating activities:






Net loss

$

(55,224)


$

(44,448)

Adjustments to reconcile net loss to net cash provided by operating activities:






Depreciation and amortization


46,146



45,731

Stock-based compensation


21,084



28,405

Lower of cost or market adjustment


12,883



10,723

Provision for bad debts


1,297



1,488

Provision for (benefit of) deferred income taxes


1,674



(5,464)

Impairment of assets


324



8,590

Changes in operating accounts, net of acquisitions:






Accounts receivable


10,777



36,357

Inventories


(13,959)



(26,236)

Prepaid expenses and other current assets


(2,939)



(1,619)

Accounts payable


3,463



(9,938)

Accrued and other current liabilities


(4,734)



(10,841)

Deferred revenue


2,869



1,763

All other operating activities


(5,985)



3,729

Net cash provided by operating activities


17,676



38,240

Cash flows from investing activities:






Cash paid for acquisitions, net of cash assumed


(36,541)



Purchases of property and equipment


(21,072)



(12,014)

Additions to license and patent costs


(875)



(790)

Other investing activities


(2,350)



(1,000)

Proceeds from disposition of property and equipment


271



Net cash used in investing activities


(60,567)



(13,804)

Cash flows from financing activities:






Payments on earnout consideration


(3,206)



Payments related to net-share settlement of stock-based compensation


(4,494)



(1,507)

Repayment of capital lease obligations


(297)



(786)

Net cash used in financing activities


(7,997)



(2,293)

Effect of exchange rate changes on cash and cash equivalents


4,273



1,572

Net (decrease) increase in cash and cash equivalents


(46,615)



23,715

Cash and cash equivalents at the beginning of the period


184,947



155,643

Cash and cash equivalents at the end of the period

$

138,332


$

179,358







Cash interest payments

$

378


$

633

Cash income tax payments, net

$

4,715


$

8,040

Transfer of equipment from inventory to property and equipment, net

$

8,964


$

9,395

Transfer of equipment to inventory from property and equipment, net

$

364


$

349

Stock issued for acquisitions

$

3,208


$







3D Systems Corporation

Schedule 1

Loss Per Share

Quarter and Nine Months Ended September 30, 2017 and 2016


















































Quarter Ended September 30,


Nine Months Ended September 30,

(in thousands, except per share amounts)

2017


2016


2017


2016

Numerator for basic and diluted net loss per share:












Net loss attributable to 3D Systems Corporation

$

(37,670)


$

(21,213)


$

(56,057)


$

(43,649)













Denominator for basic and diluted net loss per share:












Weighted average shares


111,697



111,008



111,467



111,194













Net loss per share, basic and diluted

$

(0.34)


$

(0.19)


$

(0.50)


$

(0.39)













3D Systems Corporation

Schedule 2

Unaudited Reconciliations of GAAP to Non-GAAP Measures

Quarter and Nine Months Ended September 30, 2017 and 2016


















































Quarter Ended September 30,



Nine Months Ended
September 30,

($ in millions, except per share amounts)

2017


2016


2017


2016

GAAP Net loss attributable to 3D Systems Corporation

$

(37.7)


$

(21.2)


$

(56.1)


$

(43.6)

Adjustments:












Amortization, stock-based compensation & other 1


15.5



29.1



47.7



65.6

Legal and acquisition-related 2


(0.4)



1.8



1.4



4.5

Portfolio restructuring 3




6.1





6.1

Tax effect of adjustments 4








1.5

Non-GAAP net income attributable to 3D Systems Corporation

$

(22.6)


$

15.8


$

(7.0)


$

34.1

Non-GAAP net income per share available to 3D Systems
common stock holders - basic and diluted 5

$

(0.20)


$

0.14


$

(0.06)


$

0.31













1 For the quarter ended September 30, 2017, the adjustment included $0.1 in COGS and $15.4 in SG&A. For the quarter ended September 30, 2016, the adjustment included $10.8 in COGS and $18.3 SG&A. For the nine months ended September 30, 2017, the adjustment included $0.3 in COGS and $47.4 in SG&A. For the nine months ended September 30, 2016, the adjustment included $10.9 in COGS and $54.7 in SG&A.

2 For the quarter ended September 30, 2017, the adjustment included ($0.4) in SG&A. For the quarter ended September 30, 2016 the adjustment included $1.8 in SG&A. For the nine months ended September 30, 2017, the adjustment included $1.2 in SG&A and $0.2 in interest and other income, net. For the nine months ended September 30, 2016 the adjustment included $4.5 in SG&A.

3 For the quarter and nine months ended September 30, 2016, the adjustment included $6.1 in R&D.

4 Tax effect for the quarter ended March 31, 2016 was calculated quarterly based on the Company's overall tax rate. Tax effect for the quarters ended after March 31, 2016 were calculated based on the Company's quarterly U.S. tax rate of 0%, which is due to valuation allowances in connection with GAAP net losses.

5 Denominator based on diluted shares used in the GAAP EPS calculation.


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SOURCE 3D Systems