3D Systems Reports Q3 Revenue

VALENCIA, Calif.—(BUSINESS WIRE)—Nov. 3, 2005— 3D Systems Corporation (Nasdaq: TDSC), a leading provider of rapid 3-D printing, prototyping and manufacturing solutions, announced today that revenue increased 9% in the third quarter of 2005 and 10% in the first nine months of 2005 compared to the corresponding 2004 periods.

"Revenue growth in the third quarter of 2005 continues to reflect the strong underlying trends we mentioned in previous quarters as we move forward with the transformation of our business model, product mix and product portfolio with increasingly positive traction," said Abe Reichental, 3D Systems' president and chief executive officer.

Revenue from systems and other products increased by more than 10% in both the third quarter and first nine months of 2005 compared with the prior-year periods. These increases reflected continuing strong unit demand from large-frame systems, further fueled by the introduction of new-generation selective laser sintering and stereolithography rapid manufacturing systems and a favorable price/mix effect.

Revenue from engineered materials and composites increased by over 20% in both the third quarter and first nine months, primarily reflecting strong unit growth from VisiJet(R) 3-D printing materials, newly introduced SLA(R) and SLS(R) plastic materials and the company's success in attracting additional customers to its growing portfolio of engineered materials and composites.

Revenue from services declined by approximately 6% and 1% in the third quarter and first nine months, respectively, primarily due to lower revenue from customer training, maintenance and upgrade services, reflecting a deliberate shift in the company's marketing strategy to de-emphasize its ongoing support of certain legacy systems.

                Revenue By Class of Product and Service
                            ($ in millions)
                                Third Quarter      First Nine Months
     Product or Service      2005  2004 % Change  2005  2004 % Change
Systems and other products  $12.1 $10.9    11%   $34.1  $30.6     11%
Materials                   $10.9  $8.8    23%   $31.9  $26.4     21%
Services                     $9.3  $9.9    (6)%  $29.6  $30.0     (1)%
Total                       $32.3 $29.7     9%   $95.5  $87.1     10%

"While on the surface third-quarter revenue growth is somewhat disappointing, it is worth noting that we ended the third quarter with over $9.8 million of orders for shipments to be made in the fourth quarter and in subsequent periods, primarily for the purchase of systems. Over $6.4 million of those orders are scheduled for shipment in the fourth quarter of this year, and the balance of them are scheduled to be shipped in 2006. Given our relatively short lead times for delivery of our systems, we typically end every quarter with little or no backlog. The substantial backlog of orders at the end of the third quarter is of such magnitude that it gives us confidence that our business model is continuing to gain traction and momentum.

"Notwithstanding our successes to date, the kind of business transformation that we are involved in does not come without corresponding investments and costs of the kind reflected in our third-quarter profitability," continued Reichental.

With this higher level of revenue and corresponding investments and costs for the third quarter of 2005:

-- The company reported that operating income declined to $1.5 million in the third quarter from $2.3 million in the third quarter of 2004, primarily reflecting lower margins associated with its service business, higher R&D expenses, and higher SG&A expenses arising primarily from the absence this year of benefits that the company recognized in the 2004 quarter from reductions in various accruals.

-- The company reported that net income available to common stockholders declined to $0.7 million from $1.7 million in the 2004 quarter, primarily due to its lower operating income.

And for the first nine months of 2005:

-- The company reported a fourfold increase in operating income to $4.8 million from $1.2 million in the 2004 period.

-- The company reported that net income available to common stockholders grew to $2.4 million, a $4.4 million improvement over the company's $2.0 million loss in the 2004 period, primarily due to its higher operating income.

Foreign currency translation had a slightly unfavorable effect on consolidated revenue for the 2005 quarter and a 1.1% favorable impact on revenue for the first nine months.

"Our newly introduced state-of-the-art rapid manufacturing systems, our initiatives to increase recurring revenue from materials and composites, continuing growth in our InVision(TM) 3-D printing installed base and the 2004 restructuring of our U.S. sales organization all contributed to the higher level of revenue in the third quarter," added Reichental.

"Sales of new products introduced within the last two years grew to almost 28% of total revenue in the quarter and over 23% of total revenue in the first nine months of the year, validating our accelerated product mix transformation and the investments in R&D and other related field support activities that we have made during the past two years," continued Reichental.

The company experienced strong revenue growth from its operations in the U.S., which rose almost 28% in the third quarter and 17% in the first nine months of 2005 as the company realized the benefits of the 2004 restructuring and realignment of its U.S. sales organization. Revenue from European operations increased only modestly in the first nine months because of unfavorable economic conditions in several European countries and reflected a slight increase for the quarter. Although revenue from Asia-Pacific operations in the first nine months was almost 8% ahead of last year's period, it decreased by 14% in the third quarter compared to 2004 levels, reflecting the lumpy effect that large-frame systems' sales can have on parts of our business in a given reporting period.

                         Operating Highlights
              Third Quarter and First Nine Months of 2005
             ($ in millions except for per share amounts)
                               Third Quarter      First Nine Months
   Operating Highlights     2005  2004 % Change  2005   2004 % Change
Revenue                     $32.3 $29.7     9%   $95.5  $87.1     10%
Gross profit                $14.9 $14.1          $42.2  $38.4
    % of Revenue                    46%      47%        6%            44%        44%        10%
Operating  expenses                    $13.4  $11.7                    $37.4    $37.2
        %  of  Revenue                              41%      40%      14%            39%        43%          1%
Operating  income                          $1.5    $2.3                      $4.8      $1.2
        %  of  Revenue                                5%        8%    (37)%            5%          1%      291%
Net  income  (loss)  to  common    
  stockholders                                $0.7    $1.7                      $2.4    ($2.0)
        %  of  Revenue                                2%        6%    (56)%            2%        (2)%      NM
Diluted  income  (loss)  per
  share  to  common
  stockholders                              $0.05  $0.12      (58)%    $0.15  ($0.16)        NM
Unrestricted  cash                      $26.0  $19.9        31%      $26.0    $19.9          31%
Depreciation  and                          
  amortization                                $1.6    $1.8                      $4.7      $5.2
        %  of  Revenue                                5%        6%    (13)%            5%          6%        (9)%

NM=not  meaningful

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