3D Systems Reports Third Quarter 2017 Financial Results

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

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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) 115 115 and 115,113 (2016) 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 Nine Months Ended September 30, 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 26 22 161 68 to noncontrolling interests Other comprehensive income (loss) attributable to 4,854 4,278 25,519 5,553 3D Systems Corporation Comprehensive income (loss) (32,435) (17,127) (29,544) (38,827) Less comprehensive income (loss) attributable to 381 (192) 994 (731) noncontrolling interests 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 $(0.20) $0.14 $(0.06) $0.31 common stock holders -basic and diluted 5 === 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