3D Systems Reports Q1 Revenue

VALENCIA, Calif.—(BUSINESS WIRE)—May 4, 2006— 3D Systems Corporation (NASDAQ: TDSC), a leading provider of rapid 3-D Printing, Prototyping and Manufacturing solutions, reported the following operating results for the first quarter of 2006 today.

Revenue grew to $33.5 million, a 10% increase over the 2005 period and a new first-quarter record. Foreign currency translation had a $1.3 million adverse effect on revenue in the quarter, reducing first-quarter revenue growth by 4.3 percentage points from what would have otherwise been 14.5% revenue growth.

"Following on the heels of our all time record revenue in the fourth quarter of 2005, we are extremely pleased to report another record revenue quarter as we continue to benefit from higher sales of new products," said Abe Reichental, 3D Systems' president and chief executive officer. "However, our continued success is exposing us to some growing pains as our significant increase in new systems' placements is stretching our field engineering resources. That, in combination with our planned accelerated relocation and restructuring activities with our previously announced move to Rock Hill, South Carolina, which we expect to complete this summer, and our Oracle(R)-based ERP system that began operating successfully on May 1, negatively affected our first-quarter earnings and resulted in $0.6 million operating loss and a $1.2 million or $0.08 per share net loss available to common stockholders on a fully diluted basis," continued Reichental.

"Specifically, some of our more sophisticated, automated manufacturing systems required extensive commissioning and training. As a result of the high volume of sales of these systems and the need to provide more extended customer training support and installation activities than the traditional services provided with our legacy systems, we have experienced significant field service resource constraints. We believe that the additional costs and foregone ordinary service revenue associated with these growth challenges adversely affected our revenue growth and profitability during the first quarter of 2006 as we have devoted substantial resources to meeting the needs of our customers. While we believe that these are healthy growth pains, we are putting in place a corrective action plan to cope with the increased activity level proactively and cost effectively," said Reichental.

"These growth challenges contributed to our $0.6 million operating loss for the first quarter. Other significant items that contributed to this operating loss were $1.6 million of severance and restructuring costs that we incurred in the first quarter related to our relocation to Rock Hill, South Carolina, which were in line with our previously disclosed expectations, $1.1 million of higher selling, general and administrative expenses, including $0.4 million of higher sales expenses associated with increased revenue and a $0.2 million expense under SFAS No. 123R for previously granted stock options, and $0.6 million of higher R&D investments reflecting our continuing work on new product development efforts. These higher operating expenses more than offset our higher gross profit arising from our higher revenue in the first quarter," concluded Reichental.
               Revenue By Class of Product and Service
                             ($ Millions)
----------------------------------------------------------------------
                                           First Quarter
-------------------------------------- --------------------- ---------
                                         2006       2005     % Change
-------------------------------------- ---------- ---------- ---------
Systems and other products                 $12.3      $10.2        21%
-------------------------------------- ---------- ---------- ---------
Materials                                  $11.9      $10.1        18%
-------------------------------------- ---------- ---------- ---------
Services                                    $9.3      $10.2       (9%)
-------------------------------------- ---------- ---------- ---------
       Total                               $33.5      $30.4        10%
-------------------------------------- ---------- ---------- ---------


Revenue from systems and materials increased by 21% and 18%, respectively, in the first quarter of 2006 from 2005's first quarter. Systems' and materials' revenue benefited from volume increases from newer systems and materials and the favorable combined effect of price and mix. These increases were partially offset by a decline in core product unit volume and unfavorable foreign currency translation.

Revenue from services decreased 9% to $9.3 million for the first quarter of 2006 from $10.2 million for the first quarter of 2005 principally due to a $0.4 million unfavorable effect of foreign currency translation, planned reductions of legacy systems' upgrade packages, some of which we have discontinued, lower volume of certain replacement parts now experiencing longer service lives, and foregone ordinary time and material field service revenue as a result of our resource constraints in connection with the productivity effects from the growth challenges discussed above.

Revenue from U.S. operations increased by 28% to $18.3 million for the first quarter of 2006 from $14.3 million for the first quarter of 2005 due to higher volume and favorable combined price/mix effects. U.S. operations benefited from a previously restructured sales force, sales to new customers and to a broader range of applications, and new revenue generation resulting from promotional efforts for materials in prior periods.

Revenue from European operations was $11.1 million for both the first quarter of 2006 and the first quarter of 2005. The positive effects in Europe of increased revenue from new product sales and the favorable effect of price and mix were more than offset by the unfavorable effect of foreign currency translation. At constant exchange rates, European revenue would have increased by 9%.

Revenue from Asia-Pacific operations decreased 18% to $4.1 million for the first quarter of 2006 from $5.0 million for the first quarter of 2005, reflecting quarterly fluctuations in sales of large systems and the effect of the growth challenges mentioned above.

Although backlog has historically not been a significant factor in the company's business because of relatively short production and delivery lead times, the company had approximately $2.8 million of booked orders outstanding at March 31, 2006, primarily for systems, all of which it expects to ship in 2006. We believe that this lower level of booked orders remains higher than the company's historical experience.
                         Operating Highlights
                ($ Millions, except per share amounts)
----------------------------------------------------------------------
                                           First Quarter
-------------------------------------- --------------------- ---------
                                         2006       2005     % Change
-------------------------------------- ---------- ---------- ---------
Revenue                                    $33.5      $30.4        10%
-------------------------------------- ---------- ---------- ---------
Gross profit                               $14.0      $13.0
    % of Revenue                              42%        43%            8%
--------------------------------------  ----------  ----------  ---------
Operating  expenses                                                  $14.7            $11.4
        %  of  Revenue                                                            44%                37%              29%
--------------------------------------  ----------  ----------  ---------
Operating  income  (loss)                                        ($0.6)            $1.6
        %  of  Revenue                                                          (2%)                  5%            N/A
--------------------------------------  ----------  ----------  ---------
Net  income  (loss)  to  common
  stockholders                                                            ($1.2)            $0.8
        %  of  Revenue                                                          (4%)                  3%            N/A
--------------------------------------  ----------  ----------  ---------
Diluted  income  (loss)  per  share  to
  common  stockholders                                            ($0.08)          $0.05              N/A
--------------------------------------  ----------  ----------  ---------
Depreciation  and  amortization                              $1.5              $1.5
        %  of  Revenue                                                              4%                  5%            (2%)
--------------------------------------  ----------  ----------  ---------
 


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