XONE - Earnings call transcript Q2 2018

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Operator

Greetings and welcome to The ExOne Company second quarter 2018 financial results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Karen Howard, Investor Relations.

Karen Howard

Sherry. you, Thank everyone. morning, And good We appreciate financial second XXXX for time conference call. today results our quarter your Referring slide our with Vice our me Executive to Chief the Brian President today on our Officer; and and are deck of on Financial Corporate Kent Doug our Officer Rockwell, Smith, Chairman Development; Chief two, and Senior slide Zemba, line Treasurer. be distributed were published press release yesterday Kent, that Brian in results and reviewing the Doug afternoon. will the

at available you on slides www.exone.com. have slide site release, Safe our If today our posted statement. our Harbor On The it's accompany also on discussion don't site. our three that is Web that are Web

in documents point provided the call, Commission. also at to future as will Exchange presentation risks to that I documents during other that, uncertainties our As some on and Securities where you company we as These during by results performance. www.sec.gov. well the are as These also and are we today. factors other we which from and well differ actual forward-looking we useful to other be Web statements filed risks may believe site with Q&A. cause found make want our financial or earnings today's are discuss and aware, non-GAAP that These out events may factors can to uncertainties are the during could this may subject the be release as apply some and statements measures, in evaluating

GAAP. not isolation accordance information for prepared in or consider as this with substitute should the results additional You a in of presentation

and will the an us today's back non-GAAP my open answers. and a measures will operational earnings go call review financial before started, GAAP Kent Brian turn for to that, pleasure then And We have with it's release. the our the it we'll in to up results, provide Kent. to the provided you tables a of and reconciliations perspective begin, we update detailed through Doug will comparable on to turn accompanying offer over get line to to Kent outlook of questions

Kent Rockwell

Welcome taken several and Thank you, CFO Karen. instituted which Smith, Zemba, moved to president quickly who XXXX. for vice And Brian quarterly management We've we've quarter, review CEO ExOne, has is and in morning, formerly run development. for returned chief second role just the us. of in again. changes, for addition late good the chairman. go was the the in our over And CFO, to of announced, the Doug role quarter our treasurer. Jared have I'll business to into of that now I the the corporate role office officer, being has Helfrich former the accounting senior those of our to commercial moved everybody.

a G&A we our initiated slim is Additionally, review on we will that million to go year. through we To late XD and implemented Roger more we've actually to during technology added pleased member, $X we I to touch area date, will and the And identified sold there goods of those. implement that R&D of cost savings. the believe our in as inefficiencies spending. after Brian him Beginning worth is we're reduction – Roger lot of remove quarter, in activities Thiltgen. new cost board investor experience the Texas has several us. QX, and from join have a a

cash and by costs the annualized goal $XX hit on out end Our achieve help to basis we the profitability That year. as positive an to target XXXX. of us million of is flow get our of is

IDC side slides. – the of few $X to be the two-thirds going we co-located. biggest the in a to that rate of $X of next minute. of be you'll materials company provide Western our specifically will that's just more Secondary that comments has in Europe billion. on XD hardware focus or to here growth a that about a two of that is second-half US, just business associates strategic a hear – reprinting that by XXXX and of excess my in volume. and substantial performance. want reported going in in XX%. be Printers to billion goal, followed recently by And of highlights chunk the billion from their CAGR I'm will the for And we spent in some the see are course, to quick that where improvement $XX I'm The the

and in be in activity. capital share. a spend to the that if want applying subset to the estimation, which of would timeframe, from and be will its binder If years, ExOne to all my that of a $X generate vision ExOne that to market technology robust XXXX. is is jetting least is market is to the global give bring billion will of Moving achieve XX% do The few this XX% reported that you we at billion that's be I are to our – realm $X to for billion the market. well-positioned deal we that. of It the to how within than to million to think about $XX last large machines production great to $XXX funding, resources that market having very the less a we next And our able of million of market. all that can machines try perspective this market. fit they've new we're the that XX% slide, R&D market $X.X activity, in $XXX XX% human a I accomplish that of billion

the to get years sums there. the able So, be we're to last to having two spend in extraordinary

highlights. So, with that, will just I'm Brian going give to pass this over who other to you some Smith

Brian Smith

Good Okay. everyone. Kent. Thanks, morning,

years. and opportunity well in the is career. for congratulate Before start, his has very experience Doug He six-and-a-half this his to accomplished his CFO to treasurer. next last ExOne from professional his I benefited promotion on prepared and and like I'd an greatly energy over is

could $XX.X with finished million If of will the slide some revenue. you turn please from quarter. nine, the to in highlights quarter summarize I the We

certainly is lower We we customer's have not installation arrival, cadence. That acceptance. timing expected, machines. was of our impacted machine this being our expectations by revenue are with acceptance consistent the machines of shipped While awaiting their of XX our currently that what our than customers to and/or

much machine our XX%. expect approximately revenue to in of to which half XXXX closer opposed XX% We historical an the second weighting general was weighting, as

strong $XX.X action tell plans Our machines. the us our we that and on execute timelines, inventory machines our including that XX pipeline well of our understanding achievable of our XX% mentioned, and our goal customers' is as and machines installation our of these available of I as of opportunity growth million, delivery backlog if current

XX-month growth is revenue Our goal. very of to XXXX close annual that trailing XX%

Moving the recoater base about This the well powders, revenue to received We're have are larger in our these printer, difficult can build are generally printing. believe evenly, profiles. new application. they the more our direct industry. expensive other machines as recoater centering we X.X, testing powders XD quarter. injection boxes. that M-Flex system midsize ultrasonic users material our have in with well that up with second our the this We in This that the those second our MIM extremely for since finer including planned this well-understood and expect generally Printing system. is broadly, under that recoater And on machines are cohesive later with in molding are development. metal are knowledge powders. associated activities includes our our The excited namely than of orders to also these M-Pro. done have powders machines recorded of fine build speed to is spread the Innovent+ powder used many metal box pending being documented being powders development quarter properties That brand-new, Innovent+ they important the powders works as and year. less deliver machine we powders build our as To Innovent+ six in on direct scalable, development, we and new currently first machine is box shipped both Those new date, more printer, patent metal we

slide Now, please turn to XX.

the machines of in roadmap Here between process. direct using you the some split print product will see our we're materials and

the making well as are M-Pro. very progress M-Flex X.X as We good on

recent to scale As us changes, has strong created both the our we have between part of teams, with development allowed which interaction lower of machines these development two expenditures. overall

for sale reception us We initial expect for release of printers. Innovent+ great printers release The these gives the XXXX. to to two our these expectation of customers in the customer new

mining this will On in are XXXX. the fall. we material is XXXX the expected working used releasing in commonly and later the for construction XXX stainless High-density new be materials is on release and in into industries. side, and market This metals several

target XXXX. properties alloy corrosion heat the and energy, in Our first make that nuclear in and medical XXX half has nickel is of will the industries. material applications it aerospace, expected and This resistant

expect work variety therefore, in industries. these also of very tool for [ph] well resistant deformation hardness and, they steel new of We of the materials, Because distinctive abrasion releases. to several and tooling a are

tooling This, us customer will of printing Later success These second this parts be In the second contract for delivery be washout used materials, for of in and will by slide of wear half our the year. used in carbide XX, for the ISO This two area plates, terms of is machine success of important And tools for expect printing XXXX. are over is our principally on the contract well be moving partnership we compliance. in will print expected in Defense completed various our parts commercial years our new stages the sales market with duct June to and our deliver to for announced the this in printing with customer. pursuing last third-year. Missile ceramic opportunities to XXXX. commercial efforts aerospace tooling, is In to we for products our on area, forward allowing to approximately excited first year, a on Agency production expect S-Print of SGL this other the aircraft. purpose of we of under tooling be the specialty development area. previously our applications. award molds in this industry awarded were the as contract, to we carbon We $XXX,XXX nicely the in that in commercial graphite process Based And composite final of this our with the half XXXX. of initially work offer silicon as in

partners plans Our several efforts XXXX. in are our other to to for this commercial product broaden

Now, our initiative We're making on announced please turn you'll if we global slide progress cost that June. realignment in great to XX. late

changes $X over principles on principally efforts we reduction date, of spending instituted broader effort have process-wise, individual and areas supply across XXXX, positions and optimization focused focused million and Culturally to consulting, of have have our we in expense, the enhancements to redundant excess and disciplined have travel our of at identified costs. been of both In reduced opportunities and half coordination a company. the second in on and we our increase the Our machines will employee or To Longer-term, costs. each identification overlapping in we for and outsource. early for base asset communication were around chain consumables. facility

to our efforts that, will turn details quickly. our for continue more terms, now as standardizing well with shortening With to customers over results. our to good inventory working to efforts as acceptance I PO our like to our more turn around targeted it would process, other discuss contract Our progress to be Doug capital payment on

Douglas Zemba

everyone. Brian. Good morning, Thanks,

please compared If XXXX revenue. to XX, could Revenue start to XXXX. X% will we with QX turn up slide million $XX.X you to in was

was XXXX in XX% For the for that XXXX XX that revenue XX% we to and growth revenue we still Recall of on had XXXX. goal. our for up are over guided trailing months, track excess

we'll Now, to XX. slide go

three sales that sales S-Max to one see our can Innovents. one down in as machine are our XXXX. XX% Innovent+ sold you first quarter S-Print, our of second XXXX in the million QX $X.X Here compared were one QX seven our M-Flex, and to machines There were machine, Included second quarter.

tooling to the average our lower dollars first-time of They year's Four quarter. platforms the customers' more machine driven Last sold machines higher recognized operating machine seven a eight the revenue of that back shows in in So, our indirect selling were generally our which second into customers. a quarter, price customers that three type. sales automotive, and toward refer diverse in by it by machines have Industries release the included our this and were energy. we causing heavily during already Please year, was needs. weighted to are to varying application the we were sold systems quarter mix our table machines. second machines of

Institute, group on a $XX.X the the this to was machines can revenue up European such trailing right powder institute. million. We QX over of XXXX the the research metal XX% also you XX-month slide, sold the and printer revenue to research by third company's acquired a Referring research chart to see XXXX machine

Now, XX. if to slide we turn can

There indirect machines. yet machines Here you'll continues our in in We reasons the that to process performance shipments transit revenue will between machines recognition. machines second and either be terms, be and were and, by year-to-date can are and half including nine happen This first customers the XXXX. XXXX. revenue revenue. units therefore, during first and number the there see result were shipped machine in and variability of customers XX instances that of shipped quarter, our certain machine installed in delivery of XX our in to quarters to of of or for obligations the includes At recorded in type during a recorded and second direct by XX and geography. quarter-end, for of contractual or our being That in accepted lags nine

our let's sales, second driven trailing growth XXXX expanding increase direct to reflects of and including was XX. XX% and revenue growth installed Non-machine months. $X.X the the a The well were in demand partially in equipment global decrease was XX These to machines. printing actual in slide indirect XX% in as our increases respectively. operations. ancillary base This million increases our related of as for significant offset $XX.X turn and XXXX sales Now, of by services by million rates from for maintenance operation aftermarket an printing quarter

powder, the and as our we backlog for orders automotive, and Defense direct printing awarded us revenue aviation, backlog, education metal This other as non-cancelable such Now, for non-machine you, units period. Agency from machine identified includes in-transit while inventory contractual as or total our growth and machine tooling, if research, portion acceptance firmly expected plan the XX. our XX-month our million, valve, installation our We To of portion that Missile in the future growth gives you'll that includes backlog recently third manufacturing XXXX. in energy, and of includes in as remind pump and over a taken trailing maintenance quarter delivery as well of This $XX.X achieving also or finished It with and firm The X% services revenue Backlog indirect opportunities, turn to the includes where backlog orders confidence operation the were well received level also existing orders and contract our slide and general agreements. as committed lease our operating the of year. pipeline earlier, of contract, machine with dates. contracts our mentioned XX machine form industries. some funding of on machines supply have for I power, our includes customers combined customers.

XX, second was resulting XX.X% gross margin in and Turning slide profit for of XXXX. gross a $X.X profit quarter talk about million, Gross the to margin. we'll

For of the XX-month a experienced million profit gross trailing gross $XX of we XX.X%. a period, margin and

to of SG&A Please development the as The our projects. to about write-down principally second associated we XXXX Please Our second discuss was increase $XXX,XXX impact and we'll our CEO. The we'll less manufacturing. associated impacted The former margins slide was also quarter quarter XXXX. XXXX, of discuss write-down up impacted slide facility. increase our the XXXX a gain in accelerated our SG&A. industrial second our the Las taken we Exerial second for and turn recognized and Comparing was quarter with have the X.X reflects our Vegas by during R&D. separation than to to expenses favorably XXXX of current former microwave write-down XX affect of with and costs M-Pro $XXX,XXX. platform XX quarter sale for second inventories actions program quarter were M-Flex global investment in of the costs XXXX period a realignment over turn future our activities our for This were discontinued of the cost which our a inventories machine by

please to CapEx. let's review to slide XX turn Now,

Our modest. cash CapEx remains very

compared QX quarter was for $XXX,XXX cash Our second XXXX. spending about about to $XXX,XXX

as We portion CapEx shown expect of for this indirect opportunities, transfer from to XXXX cash inventory commercial The from inventory the principally our year. development transfers activity customer and spending with support in PP&E to as non-cash CapEx approximately customers. R&D pertains level into or operation, here be sales PP&E continue will $X.X to in full million for our for to leasing well and we use million direct estimate own of the machinery for to our printing $X

please of about we of chart to to deposits XX, capital increases $X.X cash of represents of is the title half CapEx the XXXX. changes and note I from by first an previously. second that release Turning customer resulted offset from to our slide this on increase yesterday mentioned This XXXX support Working heading amended million, slide principally AR our This in original collections cash our orders. revenues flows. half a inventory expected on in waterfall afternoon.

of $XX million $XX and Our XXXX we items, cash about the used net and the cash loss, other half in million in first of first ended net of cash. half at

comments XX, back I'll to balance sheet. see prepared no slide and it to virtually have continue our on turn we concludes That you'll If turn my you'll debt Kent. to

Kent Rockwell

order able rate The we our for despite examining is XX% can you, the in or forward good sales the in that tell from just month Really quarter. I And activities probably growth. spending the we were much in regards R&D. that activities had the get recognition. that anticipated We sustain to earlier anemic excess going the spend bit growth do than company fact rate spend we Doug. we don't And our in you, spent customer-related revenue our incremental focus positive and said maintain releases. is or prior was every reviews revenue in a $X quarter comfortable Thank We've would achieve from that backlog, will be The I our to we force clear this little goal. a with with to more we'll less. to to quite think a that as that in that bit that as do has been need that. But I'm we million little of

plenty the two to the so machines we there looks is fine these positive. So, powder get into into – get And of demand for those money be we accomplished, XXXX. that machine to new as programs machines have going quite

and increase. that expecting cash We've We in for implemented structure and have degree, quite with to burn and Doug gotten company both million XXXX, a just question these possibly it's the flow we be of operate to cost we during to to that Brian already that half should in cost savings that well able is so to see The second kind going profitably of than have to are cash of savings are revenue a costs order that of XXXX. real. half timing our to very ebb get captured other $XX stabilize that of good more a have this improve along discussed

are resources sufficient. capital Our

to able XX% be XXXX and plans, we hit meet We these rate, into enough than cash to cash of growth move if with our operating successfully. all to – have we have this more enough needs

at take in questions. so, with be raising glad regards have plans to to I'll point time. other that, no any With And any capitals this we

Operator

Thank you. [Operator Instructions].

proceed. from Chris question Riley is Van with first Horn Please B. Our FBR.

Christopher Van Horn

guys. Thanks morning, for taking call. the Good

Brian Smith

you are How Chris. doing? Hey,

Christopher Van Horn

Good.

Can versus wrong cost going starting we income they're statement of but now with i.e. just I'm savings, $X then, And other places? versus million of So, XXXX. the there. you more thank think some – SG&A color and outsize if sounds some the about million for areas cadence in just on COGS get sense that? than $XX correct it – a giving that do the starting XXXX we quantification in are like How any there right me are to – others,

Kent Rockwell

that, Doug will answer Chris.

Douglas Zemba

Sure, Chris.

say, the for expected, So, savings we've with XXXX, just we the in to million of to facilities. that down that clarify, costs toward in have overhead can some first second a tipped that's million components. $X we general, savings it XXXX, our at a substantially for spending come we – $X million bit like acted taken of believe actions actually, look would over of three the targeted or $X half. on control approximately of We can but believe G&A, $XX R&D million. The all do million indirect are already about the And of as taken feel touches $X the that we'll some our is and – the we've I million that mentioned, referenced Kent half we've the better. the second we $XX of that it expect heavily

Kent Rockwell

also We cost charges been help will have that some so consulting were did sold, Chris, that hitting margin. terminated, of and have, goods which

Christopher Van Horn

the got markets doing format the And Okay, the well are terms Innovent, for what really curious – could more this for timing just Is that in Thanks And marketplace. a visibility what printer? obviously, then, target you big of us in just of if this it. give Innovent. large-volume I'm very clarification. technology?

Brian Smith

printer. The is smallest Innovent our

toward a markets So, really small and research many very both targeted job It's got university labs for companies. it's box.

them. new we we want or to X.X to the print look in then the Innovent Innovent the production of M-Flex would so, moving They to M-Print. that the that do machines And can the and companies we when now, powders printing out next prove precursor the to they that's way release the up two that Innovent+, is

very the is we've to Innovent+ our And in having already for it – very release orders six more got quick. we one think pretty response the and that of important. is So, revenue

sell number. total, XX in think, were for looking a roughly ballpark I to year the around in we Innovents whole

generally. albeit to really point, of smaller that price for – us, it's machine growth So, is good that machine $XXX,XXX that $XXX,XXX sale is growth a – the

Kent Rockwell

into market it to smaller So, that's bringing to don't of the production through printers ones they to move own into effectively. so through use prove the one be that university, a know going is we're to association to large their that they'll use some one these XXXX themselves, going up in take format how materials, if able they with anybody –

for sort of the a we starting of it's uses received a fine size. the plus a tool it's them. it's Innovent whereas really the think well going But So, been and there's powder demand for lot solution, straight be because that ultimate larger micron powder

Christopher Van Horn

great. trends comment sequential if Okay, in it. the wondering seeing And the just at to and any Got you've know then, because rates on you want usage kind services if just can and the customers you're there. growth seen of materials

Kent Rockwell

the to them didn't we this make Well, capital-intensive that. transition we had And we there was it's got high make guys was customers The transition. in to a to avoid Their themselves return, gotten buying customers than point by we've And they started drove from it bit, foundry off side. anticipated recognize, where We from indirect want now that technology. resistance foundry really to indirect because to facilities. longer are customers do hey, the the see machines this; on because multiple no lower buying the slower our foundaries new can the primarily bit technology.

and there's to profoundly is of the going customers, machines The is that certain plenty this with OEMs more And into be think their printing market. own accepted that operate now machines. obsoleting moving other their becoming that we're third, recognition technology indirect they're in now clear that So, we processes, think, I that. fourth seeing,

growth. side, direct it's the it's also more more much but On nascent, higher probably

more the that believe the of it in opportunity you market, described XXXX. the alive materials what too, powder in the printing that come metal printing. coarse all IDC substantially that's that is is into sand to going much move will was right mid-year In It's to size about in that we as microns. getting XX as very And terms or come sort our migrate to of total towards But first that now, to the for Innovent. down to M-Pro, XXXX. of right predominant then the which powder larger of X.X finally it online get we've the got offering XX will M-Flex And, the and the we platforms,

Christopher Van Horn

Okay, of we're kind great. picking it And activity from seems [ph] in expanding. this and hearing obviously, year, especially is really that and additive back half others like the up, of manufacturing then, OEMs is

point And unique technology But And that. of just it And the building. so view, marketplace? of you're wondering is seeing more standpoint. space? a ramping. know on feels like much. of and a it the this how are any you So, maybe guys is I strategic broad very really the comment from adoption you a nature competitive commentary what some you've competitive competitive just you got from like see market seeing advantages. kind to what really around seems I wanted Thanks have have

Kent Rockwell

Sure.

that of see we we we've But, share any right into we do enhancements about we to got that it market now, Just through as The make indirect market and although just XXXX. looking this to we're dominant that own not are the need influences that buying machines. continue time, technology. said, at touching of competitive their believe that acceptance I broader some it's doing we fourth a the as technology strong recognize third a move regard, that bifurcate market, operators and and in And at point pieces. I'll in that two to market we

And XX swing. they or able some use of as them to these get people of into full will XX be

think, well. So, it's, fairly all I coming

Christopher Van Horn

Great.

Kent Rockwell

of efficiency be offering yet, a at no And lot us of there's competes is that the they're applications to And could be the that Kia supply Innovent+ of market speaking, That's much players demand exceed Motors is we're there's that will market and the My there automotive for see large they That offering the the will are, that for opportunities viewing speaking, so there's for obviously them particularly that's no opportunity. bring next one competitively desktops, GEs, all out but side, online, a that market direct in will none large years. this the in own are sure and years. five with about or how so next there just HPs, the opinion players relatively there's shot General them varying out degrees. at, but The diverse product a don't that what industry. to care see there over all There's are it. like with take a going four opportunity the to GE of There's HP I fully offering we and and expect the all I'm three successful that question. is the I a think healthy. you'll that Ford,

Christopher Van Horn

so the taking guys, much, Thanks time. Perfect. for

Kent Rockwell

Sure.

Brian Smith

Okay, thanks.

Operator

are no closing the to remarks. to back more like over this at turn [Operator There time. call for questions I Instructions]. would management

Kent Rockwell

All pretty you to taking we're – over again. see you we keep advised that going moving the next Thank you as time. in direction right. right XX comfortable and the XX We'll to excited what move actually we're months. the for Thank we're about

Operator

you. This Thank concludes today's conference.

your disconnect you may You your thank time. lines participation. at for this And

ExOne (XONE) 10 Aug 182018 Q2 Earnings call transcript