The company will hold a conference call and simultaneous webcast to discuss its operating results for the third quarter and first nine months of 2007 tomorrow morning, November 2, 2007, at 9:00 a.m., Eastern Time. Additional information relating to that call and webcast is provided below.
The company reported record third-quarter and nine-month revenue. Revenue for the third quarter increased by 21% to $38.2 million from $31.5 million for the third quarter of 2006. Revenue for the first nine months of 2007 was $111.6 million, a 21% increase over the $92.2 million of revenue reported for the first nine months of 2006.
At September 30, 2007, the company's backlog was approximately $1.5 million, approximately the same amount that the company recorded at the end of each prior 2007 quarter and a significant reduction from the $5.0 million of backlog recorded at December 31, 2006. The company believes that the June 30 and September 30 level of backlog is consistent with the normal operating trends of its business as the company's business is generally not dependent on backlog.
The company reported $0.4 million of operating income for the third quarter, reversing an $8.7 million operating loss for the third quarter of 2006. For the first nine months of 2007, the company's operating loss declined by 68% to $6.6 million from $20.4 million in the 2006 period.
The company's improved operating performance resulted primarily from its higher revenue, higher gross profit and higher gross profit margin in both the third quarter and first nine months of 2007, lower operating expenses in the third quarter of 2007, and a decline in operating expenses as a percentage of revenue in the first nine months of 2007 despite an increase in operating expenses in that period.
"I am pleased with the healthy revenue growth and the improvement in our operating results that we have experienced thus far this year," said Abe Reichental, 3D Systems' president and chief executive officer. "These improved results are consistent with our expected gains from our extensive business transformation efforts.
"I am particularly pleased that, for the third quarter, revenue from systems increased by 56%, reflecting the growth in revenue from our new systems, and that revenue from services resumed an upward growth path. I was a bit disappointed that revenue from our engineered materials and composites revenue grew by only 9% compared to the third quarter of 2006, but believe that this reflected primarily the timing of certain recurring orders and routine third quarter seasonal factors related to summer holidays in various parts of the world. Notwithstanding this third-quarter seasonality, we expect materials revenue growth to resume its double-digit growth rate for the remainder of 2007.
Operating Highlights
Third Quarter and First Nine Months of 2007
($ in millions except for per share amounts)
----------------------------------------------------------------------
Third Quarter First Nine Months
---------------------- ------------------------
Operating Highlights 2007 2006 % Change 2007 2006 % Change
---------------------------- ------- -------- ------- ------- --------
Revenue $38.2 $31.5 21% $111.6 $92.2 21%
---------------------------- ------- -------- ------- ------- --------
Gross profit $15.9 $10.7 $45.3 $30.2
% of Revenue 42% 34% 48% 41% 33% 50%
---------------------------- ------- -------- ------- ------- --------
Operating expenses $15.5 $19.4 $51.9 $50.5
% of Revenue 41% 62% (20%) 46% 55% 3%
---------------------------- ------- -------- ------- ------- --------
Operating income (loss) $0.4 ($8.7) NM ($6.6) ($20.4) (68%)
---------------------------- ------- -------- ------- ------- --------
Net income (loss)
available to
common stockholders $0.3 ($11.3) NM ($8.1) ($24.7) (67%)
---------------------------- ------- -------- ------- ------- --------
Diluted income (loss)
per share available to
common stockholders $0.01 ($0.61) NM ($0.40) ($1.48) (73%)
---------------------------- ------- -------- ------- ------- --------
Unrestricted cash $25.5 $5.3 381% $25.5 $5.3 381%
---------------------------- ------- -------- ------- ------- --------
Depreciation and
amortization $1.8 $1.0 $5.4 $4.4
% of Revenue 5% 3% 80% 5% 5% 23%
---------------------------- ------- -------- ------- ------- --------
Columns may not add due to rounding
NM=not meaningful
"With nine months in, I am gratified that our continued growth from new systems and materials more than offsets the planned decline in revenue from our discontinuation of various legacy products and other less profitable activities," continued Reichental. "With 21% revenue growth and a strong underlying trend of double-digit growth for the first nine months of this year from both systems and materials sales, we believe that our overall improved results demonstrate that the strategic actions that we have taken to reshape our organization, transform our product portfolio and re-engineer our business model are continuing to take effect."
Gross profit for the third quarter of 2007 increased by 48% to $15.9 million from $10.7 million for the third quarter of 2006 and increased by 50% to $45.3 million from $30.2 million in the first nine months of 2006, primarily as a result of the company's higher revenue in each period.
"Our gross profit margin continued to show an improving trend over the third quarter and first nine months of 2006, reflecting our higher revenue, the relatively lower increase in our cost of sales and the absence in the 2007 periods of the business disruptions, challenges and customer accommodations that adversely affected our profitability in the third quarter and first nine months of 2006," continued Reichental. "Our gross profit margin increased to 42% in the third quarter of 2007 from 34% in the 2006 quarter and to 41% for the nine-month period from 33% in the 2006 period."
Operating expenses declined by $3.9 million to 41% of revenue in the third quarter of 2007 from the third quarter of 2006, reflecting lower selling, general and administrative expenses, lower research and development expenses and the absence of the restructuring costs that the company incurred in 2006 for its relocation to Rock Hill.
For the first nine months of this year, operating expenses declined by more than 8 percentage points to 46% of revenue despite increasing by $1.3 million compared to the nine months ended September 30, 2006. This increase arose primarily from $6.9 million of higher selling, general and administrative expenses and $0.2 million of higher research and development costs that were partially offset by the absence in the first nine months of 2007 of the $5.7 million of restructuring costs that the company incurred in the 2006 period related to its relocation to Rock Hill, South Carolina.
This $6.9 million increase in SG&A expenses for the nine months ended September 30, 2007 was due primarily to $8.8 million of higher SG&A costs that the company incurred through June 30, 2007 related primarily to its restatement and other related matters that were only partially offset by their third quarter decline.
"We remain confident in our overall direction and continue to believe that the key initiatives and investments that we undertook last year have provided us with the right platform to achieve our long-term objectives," continued Reichental. "We believe that, apart from the high costs associated with the launch of our V-Flash(TM) Modeler in 2007, our quarterly operating expenses have begun to resume a more normalized run rate, and we expect a further reduction in our operating expenses both on an absolute basis and as a percentage of revenue in the fourth quarter of 2007. In this regard, we expect our SG&A expenses for the fourth quarter of this year to fall into the range of $11 million to $13 million."
The company's continuing high level of work on selected new product developments, including its new V-Flash(TM) Desktop 3-D Modeler, led to the higher research and development expenses in the first nine months of 2007. The company unveiled the V-Flash(TM) Modeler in September at its World Conference, and it expects to ship up to 100 of these Modelers to customers by the end of 2007. As a result of its intensified year-to-date research and development activities in connection with its V-Flash(TM) desktop compact modeler development as well as its accelerated materials development activities, the company is revising its estimated annual research and development expenses for the full year 2007 to the range of $13 million to $14 million from its previous range of $12 million to $13 million.
The company's $0.3 million of net income for the third quarter of 2007 resulted from its $0.4 million of operating income and $0.1 million of interest income in that period, reduced by the $0.2 million income tax provision that it recorded in the third quarter of 2007. This net income amounted to 1 cent per fully diluted share, and reversed an $11.3 million, or a 61 cent loss per fully diluted share, for the 2006 quarter. Net loss available to the common stockholders for the first nine months of 2007 declined by 67% to an $8.1 million, or a 40 cent loss per fully diluted share, from $24.7 million, or a $1.48 loss per fully diluted share, for the first nine months of 2006.
The company ended the third quarter of 2007 with $25.5 million of unrestricted cash compared to $21.0 million on a pro forma basis of unrestricted cash at June 30, 2007 net of its subsequent prepayment in July 2007 of $8.2 million of revolving credit borrowings from Silicon Valley Bank. This $4.5 million increase in unrestricted cash resulted primarily from $6.2 million of cash derived from operating activities in the third quarter of 2007.
During the third quarter of 2007, the company's total indebtedness and capitalized lease obligations declined by $23.2 million to $12.2 million at September 30, 2007, primarily as a result of the conversion in July of all of its 6% convertible subordinated debentures into common stock and the voluntary prepayment of its outstanding revolving credit borrowings mentioned above. With its stronger cash position, the company decided to permit the Silicon Valley Bank revolving credit facility to expire in accordance with its terms on October 1, 2007.
The company also continued to improve its management of inventories and accounts receivable. Inventories, which amounted to $26.1 million at December 31, 2006 and $30.8 million at March 31, 2007, continued to decline and amounted to $22.6 million at September 30, 2007. The company expects to reduce its inventories further during the fourth quarter of 2007.
Accounts receivable, net decreased by $6.4 million to $28.1 million at September 30, 2007 from $34.5 million at December 31, 2006. This decline was primarily attributable to the timing of collections, which resulted in a reduction of days sales outstanding to 68 days at September 30, 2007 from 74 days at December 31, 2006.
"We believe that our stronger financial position resulting from our substantially reduced indebtedness and improved working capital management provides us with the flexibility to pursue our near-term growth opportunities vigorously," concluded Reichental.
Conference Call and Audio Webcast Details
3D Systems will hold a conference call and audio Webcast to discuss its financial results for the third quarter and first nine months of 2007 tomorrow morning, November 2, 2007, at 9:00 a.m., Eastern Time.
To access the Conference call, dial 1-888-336-3485 (or 706-634-0653 from outside the United States). A recording will be available two hours after completion of the call for seven days. To access the recording, dial 1-800-642-1687 (or 706-645-9291 from outside the United States) and enter 21380098, the conference call ID number.
To access the audio Webcast, log onto 3D Systems' website at www.3dsystems.com. The link to the Webcast is provided on the homepage of the website. To ensure timely participation and technical capability, we recommend logging on a few minutes prior to the conference call to activate your participation. The Webcast will be available for replay beginning approximately 48 hours after completion of the call at: www.3dsystems.com under the Investor Relations' section.
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 may 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 expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, you are urged to consider statements in the conditional or future tense or that include terms as "believes," "belief," "expects," "estimates," "intends," "anticipates" or "plans" to be uncertain and forward-looking. Forward-looking statements may include comments as to the company's beliefs and expectations as to the future events and trends affecting its business and expectations 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," "Cautionary Statements and Risk Factors," and "Risk Factors" in the company's periodic filing 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.
About 3D Systems Corporation
3D Systems is a leading provider of 3-D Modeling, Rapid Prototyping and Rapid Manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input These solutions are used for design communication and prototyping well as for production of functional end-use parts: Transform your products.
More information on the company is available at www.3dsystems.com, or via email at moreinfo@3dsystems.com.
3D SYSTEMS CORPORATION
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2007
and September 30, 2006
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
2007 2006 2007 2006
----------- --------- ----------- ---------
(Unaudited) (Unaudited)
Revenue:
Products $29,142 $ 22,732 $ 85,292 $ 65,917
Services 9,086 8,738 26,294 26,327
----------- --------- ----------- ---------
Total revenue 38,228 31,470 111,586 92,244
Cost of sales:
Products 15,522 13,349 45,450 40,849
Services 6,768 7,381 20,816 21,214
----------- --------- ----------- ---------
Total cost of sales 22,290 20,730 66,266 62,063
----------- --------- ----------- ---------
Gross profit 15,938 10,740 45,320 30,181
----------- --------- ----------- ---------
Operating expenses:
Selling, general and
administrative 11,883 13,821 41,647 34,788
Research and development 3,623 3,856 10,238 10,087
Restructuring costs - 1,745 - 5,663
----------- --------- ----------- ---------
Total operating
expenses 15,506 19,422 51,885 50,538
----------- --------- ----------- ---------
Income (loss) from
operations 432 (8,682) (6,565) (20,357)
Interest expense (income)
and other, net (146) 336 1,099 661
----------- --------- ----------- ---------
Income (loss) before
provision for income taxes 578 (9,018) (7,664) (21,018)
Provision for income taxes 248 2,241 429 2,303
----------- --------- ----------- ---------
Net income (loss) 330 (11,259) (8,093) (23,321)
Preferred stock dividends - - - 1,414
----------- --------- ----------- ---------
Net income (loss) available
to common stockholders $ 330 $(11,259) $ (8,093) $(24,735)
=========== ========= =========== =========
Shares used to calculate
basic net income (loss)
available to common
stockholders per share 21,838 18,390 20,115 16,706
=========== ========= =========== =========
Basic net income (loss)
available to common
stockholders per share (1) $ 0.02 $ (0.61) $ (0.40) $ (1.48)
=========== ========= =========== =========
Shares used to calculate
diluted net income (loss)
available to common
stockholder per share 22,499 18,390 20,115 16,706
=========== ========= =========== =========
Diluted net income (loss)
available to common
stockholders' per share
(1) $ 0.01 $ (0.61) $ (0.40) $ (1.48)
=========== ========= =========== =========
(1) See Schedule 1 for the calculation of basic and diluted net loss
available to common stockholders per share.
3D SYSTEMS CORPORATION
Condensed Consolidated Balance Sheets
September 30, 2007 and December 31, 2006
(in thousands)
2007 2006
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 25,472 $ 14,331
Accounts receivable, net 28,080 34,513
Inventories, net 22,550 26,114
Prepaid expenses and other current assets 4,199 6,268
Deferred income tax assets 499 748
Restricted cash - short-term 1,200 1,200
Assets held for sale, net 3,454 3,454
--------- ---------
Total current assets 85,454 86,628
Property and equipment, net 22,495 23,763
Intangible assets, net 5,331 6,602
Goodwill 47,419 46,867
Other assets, net 2,507 2,334
--------- ---------
$163,206 $166,194
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank credit facility $ - $ 8,200
Industrial development bonds related to assets
held for sale 3,325 3,545
Current portion of capitalized lease obligations 178 168
Accounts payable 17,869 26,830
Accrued liabilities 11,696 12,577
Customer deposits 3,146 6,510
Deferred revenue 11,887 11,463
--------- ---------
Total current liabilities 48,101 69,293
Long-term portion of capitalized lease obligations 8,709 8,844
Convertible subordinated debentures - 15,354
Long-term income tax payable 939 -
Other liabilities 3,395 3,034
--------- ---------
Total liabilities 61,144 96,525
--------- ---------
Stockholders' equity:
Common stock, authorized 60,000 shares, issued
and outstanding 22,155 (2007) and 19,085 (2006) 22 19
Additional paid-in capital 173,155 132,566
Treasury stock, at cost; 44 shares (2007) and 28
shares (2006) (104) (89)
Accumulated deficit in earnings (73,756) (64,455)
Accumulated other comprehensive net income 2,745 1,628
-------- --------
Total stockholders' equity 102,062 69,669
--------- ---------
$163,206 $166,194
========= =========
3D SYSTEMS CORPORATION
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2007 and September 30, 2006
(in thousands)
Nine Months Ended
September 30,
------------------
2007 2006
-------- ---------
(Unaudited)
Cash flows from operating activities:
Net loss $(8,093) $(23,321)
Adjustments to reconcile net income to net cash
used in operating activities :
Provision for deferred income taxes (48) 2,605
Depreciation and amortization 5,449 4,415
Provision for bad debts 309 1,282
Adjustments to inventory reserves 535 (61)
Stock-based compensation expense 2,247 1,909
(Gain) Loss on disposition of property and equipment 8 (34)
Changes in operating accounts:
Accounts receivable 7,117 5,530
Lease receivable - 177
Inventories 2,701 (12,265)
Prepaid expenses and other current assets 1,975 2,933
Other assets (40) 716
Accounts payable (9,088) 5,274
Accrued liabilities (1,279) 1,111
Customer deposits (3,386) 398
Deferred revenue 95 (2,932)
Other liabilities 105 (32)
-------- ---------
Net cash used in operating activities (1,393) (12,295)
-------- ---------
Cash flows from investing activities:
Purchase of property and equipment (966) (7,697)
Proceeds from sale of property and equipment - 248
Additions to licenses and patents (521) (305)
Software development costs (502) (485)
-------- ---------
Net cash used in investing activities (1,989) (8,239)
-------- ---------
Cash flows from financing activities:
Bank borrowings (repayments) (8,200) -
Stock option and restricted stock proceeds 2,791 2,716
Proceeds from issuance of stock 20,407 -
Payments of preferred stock dividends - (785)
Repayment of long-term debt (336) (205)
-------- ---------
Net cash provided by financing activities 14,662 1,726
Effect of exchange rate changes on cash (139) (240)
-------- ---------
Net increase (decrease) in cash and cash equivalents 11,141 (19,048)
Cash and cash equivalents at the beginning of the
period 14,331 24,328
-------- ---------
Cash and cash equivalents at the end of the period $25,472 $ 5,280
======== =========
Supplemental Cash Flow Information:
Interest payments $ 1,015 $ 903
Income tax payments 1,149 902
Non-cash items:
Capitalized lease obligations - 8,919
Conversion of 6% convertible subordinated
debentures 15,354 7,250
Conversion of Series B convertible preferred
stock - 15,240
Adjustment for FIN 48 adoption 1,208 -
Accreted dividends on preferred stock - 1,003
Transfer of equipment from inventory to
property and equipment, net 1,264 1,834
Transfer of equipment to inventory from
property and equipment, net 612 543
Schedule 1
Following is a reconciliation of the numerator and denominator of the
basic and diluted net loss available to common stockholders per share
computations:
Three Months Nine Months
Ended September 30 Ended September 30
--------------------- ---------------------
2007 2006 2007 2006
----------- --------- ----------- ---------
(Unaudited) (Unaudited)
Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share:
Numerator:
Net income (loss) available
to common stockholders $ 330 $(11,259) $(8,093) $(24,735)
=========== ========= =========== =========
Denominator:
Weighted average common
shares outstanding 21,838 18,390 20,115 16,706
=========== ========= =========== =========
Basic net income (loss)
available to common
stockholders, per share $ 0.02 $ (0.61) $ (0.40) $ (1.48)
=========== ========= =========== =========
Diluted earnings (loss) per share:
Numerator:
Net income (loss) available
to common stockholders $ 330 $(11,259) $(8,093) $(24,735)
=========== ========= =========== =========
Denominator:
Weighted average common
shares outstanding 21,838 18,390 20,115 16,706
Effect of dilutive securities:
Stock options and
restricted stock awards 661 - - -
----------- --------- ----------- ---------
Diluted weighted average
shares outstanding 22,499 18,390 20,115 16,706
=========== ========= =========== =========
Diluted net income (loss)
available to common
stockholders, per share $ 0.01 $ (0.61) $ (0.40) $ (1.48)
=========== ========= =========== =========
Contact:
3D Systems Corporation
Investor Contact: Chanda Hughes,
803-326-4010;
Email Contact
or
Media Contact: Katharina Hayes, 803-326-3941;
Email Contact