3D Systems Reports Second Quarter 2017 Financial Results

3D Systems Corporation

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Quarter and Six Months Ended June 30, 2017 and 2016

Quarter Ended June 30,

Six Months Ended June 30,

 (in thousands, except per share amounts)

2017

2016

2017

2016

Revenue:

Products 

$

94,421

$

94,899

$

189,151

$

185,863

Services 

65,046

63,212

126,747

124,803

Total revenue 

159,467

158,111

315,898

310,666

Cost of sales:

Products 

46,554

46,200

91,302

90,361

Services 

32,240

31,500

63,737

62,381

Total cost of sales 

78,794

77,700

155,039

152,742

Gross profit 

80,673

80,411

160,859

157,924

Operating expenses:

Selling, general and administrative 

63,088

63,228

129,493

137,195

Research and development 

24,449

20,900

47,301

41,205

Total operating expenses 

87,537

84,128

176,794

178,400

Loss from operations 

(6,864)

(3,717)

(15,935)

(20,476)

Interest and other income, net 

933

208

1,134

334

Loss before income taxes 

(5,931)

(3,509)

(14,801)

(20,142)

Provision for income taxes 

2,067

1,700

3,108

2,879

Net loss

(7,998)

(5,209)

(17,909)

(23,021)

Less: net income (loss) attributable to noncontrolling interests

418

(561)

478

(585)

Net loss attributable to 3D Systems Corporation

$

(8,416)

$

(4,648)

$

(18,387)

$

(22,436)

Net loss per share available to 3D Systems Corporation common stockholders — basic and diluted

$

(0.08)

$

(0.04)

$

(0.17)

$

(0.20)

Other comprehensive income (loss):

Pension adjustments, net of taxes

$

(101)

$

67

$

(81)

$

36

Foreign currency translation gain (loss)

12,489

(6,654)

20,881

1,285

Total other comprehensive income (loss)

12,388

20,800

1,321

Less foreign currency translation gain attributable to noncontrolling interests

74

(43)

135

46

Other comprehensive income attributable to 3D Systems Corporation

12,314

(6,544)

20,665

1,275

Comprehensive income (loss)

4,390

(11,796)

2,891

(21,700)

Less comprehensive income (loss) attributable to noncontrolling interests

492

(604)

613

(539)

Comprehensive income (loss) attributable to 3D Systems Corporation

$

3,898

$

(11,192)

$

2,278

$

(21,161)

3D Systems Corporation

Unaudited Condensed Consolidated Balance Sheets

June 30, 2017 and December 2016 

June 30,

December 31,

 (in thousands, except par value)

2017

2016

ASSETS

Current assets:

Cash and cash equivalents 

$

153,991

$

184,947

Accounts receivable, net of reserves — $11,036 (2017) and $12,920 (2016)

126,287

127,114

Inventories

110,816

103,331

Prepaid expenses and other current assets 

20,748

17,558

Total current assets 

411,842

432,950

Property and equipment, net 

87,316

79,978

Intangible assets, net 

115,011

121,501

Goodwill 

225,104

181,230

Long term deferred income tax asset

7,983

8,123

Other assets, net 

27,989

25,371

Total assets 

$

875,245

$

849,153

LIABILITIES AND EQUITY

Current liabilities:

Current portion of capitalized lease obligations 

$

613

$

572

Accounts payable 

46,448

40,514

Accrued and other liabilities 

45,812

49,968

Customer deposits 

5,139

5,857

Deferred revenue 

42,404

33,494

Total current liabilities 

140,416

130,405

Long term portion of capitalized lease obligations 

7,360

7,587

Long term deferred income tax liability  

17,250

17,601

Other liabilities 

56,068

57,988

Total liabilities 

221,094

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 115,583 (2017) and 115,113 (2016)

115

115

Additional paid-in capital 

1,314,880

1,307,428

Treasury stock, at cost — 1,702 shares (2017) and 1,498 shares (2016)

(4,628)

(2,658)

Accumulated deficit

(629,968)

(621,787)

Accumulated other comprehensive loss

(32,560)

(53,225)

Total 3D Systems Corporation stockholders' equity

647,839

629,873

Noncontrolling interests

(2,560)

(3,173)

Total stockholders' equity 

645,279

626,700

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$

875,245

$

849,153

3D Systems Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2017 and 2016

Six Months Ended June 30,

(In thousands)

2017

2016

Cash flows from operating activities:

Net loss

$

(17,909)

$

(23,021)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 

30,575

30,435

Stock-based compensation 

14,450

18,893

Provision for bad debts 

166

2,677

Benefit of deferred income taxes 

(1,580)

(2,201)

Changes in operating accounts, net of acquisitions:

Accounts receivable 

5,549

30,375

Inventories 

(9,766)

(16,153)

Prepaid expenses and other current assets 

(2,532)

(2,463)

Accounts payable 

4,343

(4,526)

Accrued and other current liabilities

(6,727)

(4,328)

Deferred revenue

8,032

8,198

All other operating activities

(6,209)

(6,846)

Net cash provided by operating activities 

18,392

31,040

Cash flows from investing activities:

Cash paid for acquisitions, net of cash assumed 

(34,291)

-

Purchases of property and equipment 

(11,243)

(7,597)

Additions to license and patent costs 

(571)

(790)

Other investing activities

(1,650)

(1,000)

Proceeds from disposition of property and equipment

271

-

Net cash used in investing activities 

(47,484)

(9,387)

Cash flows from financing activities:

Payments on earnout consideration

(3,206)

-

Repurchase of stock, net, and employer paid tax on employee awards

(1,970)

(1,307)

Repayment of capital lease obligations 

(290)

(524)

Net cash used in financing activities 

(5,466)

(1,831)

Effect of exchange rate changes on cash and cash equivalents

3,602

783

Net (decrease) increase in cash and cash equivalents 

20,605

Cash and cash equivalents at the beginning of the period 

184,947

155,643

Cash and cash equivalents at the end of the period 

$

153,991

$

176,248

Cash interest payments 

$

400

$

211

Cash income tax payments, net

$

3,367

$

5,933

Transfer of equipment from inventory to property and equipment, net (a) 

$

7,689

$

7,529

Transfer of equipment to inventory from property and equipment, net (b) 

$

907

$

2,075

Stock issued for acquisitions

$

3,208

$

—

3D Systems Corporation

Schedule 1

Earnings (Loss) Per Share

Quarter and Six Months Ended June 30, 2017 and 2016

Quarter Ended June 30,

Six Months Ended June 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

$

(8,416)

$

(4,684)

$

(18,387)

$

(22,436)

Denominator for basic and diluted net loss per share:

Weighted average shares

111,398

111,166

111,350

111,288

Net loss per share, basic and diluted

$

(0.08)

$

(0.04)

$

(0.17)

$

(0.20)

3D Systems Corporation

Schedule 2

Unaudited Reconciliations of GAAP to Non-GAAP Measures

Quarter and Six Months Ended June 30, 2017 and 2016

($ in millions, except per share amounts)

Quarter Ended June 30,

Six Months Ended June 30, 

2017

2016

2017

2016

GAAP Net loss attributable to 3D Systems Corporation

$

(8.4)

$

(4.6)

$

(18.4)

$

(22.4)

Adjustments:

Amortization, stock-based compensation & other¹

16.3

16.1

32.3

36.6

Legal and acquisiton-related²

0.7

1.8

1.7

2.7

Portfolio restructuring³

-

-

-

-

Tax effect of adjustments³

-

-

-

1.5

Non-GAAP net income attributable to 3D Systems Corporation

$

8.6

$

13.2

$

15.6

$

18.4

Non-GAAP net income per share available to 3D Systems
common stock holders - basic and diluted⁴

$

0.08

$

0.12

$

0.14

$

0.17

¹ For the quarter ended June 30, 2017, the adjustment included $0.1 in COGS and $16.2 in SG&A. For the quarter ended June 30, 2016, the adjustment included $0.1 in COGS and $16.0 SG&A.  For the six months ended June 30, 2017, the adjustment included $0.2 in COGS and $32.1 in SG&A. For the six months ended June 30, 2016, the adjustment included $0.2 in COGS and $36.4 in SG&A.

² For the quarter ended June 30, 2017, the adjustment included $0.5 in SG&A and $0.2 in interest and other income, net. For the quarter ended June 30, 2016 the adjustment included included $1.8 in SG&A.  For the six months ended June 30, 2017, the adjustment included $1.5 in SG&A and $0.2 in interest and other income, net. For the six months ended June 30, 2016 the adjustment included $2.7 in SG&A.

³Tax 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.

⁴ Denominator based on diluted shares used in the GAAP EPS calculation.

3D Systems Corporation

Schedule 3

Unaudited Reconciliations of GAAP to Non-GAAP Measures

Expected Full Year Ended December 31, 2017

Full Year Ended
 December 31, 2017

GAAP Earnings per Share

$

(0.14)

Estimated adjustments to arrive at non-GAAP Earnings per Share:

Amortization

0.30

Stock Based Compensation

0.25

Acquisition, severance and settlements

0.05

Total Adjustments

$

0.60

Non-GAAP Earnings per Share

$

0.46

 - Tax effect is calculated based on the Company's quarterly U.S. tax rate. As a result of the valuation allowance previously recorded in connection with GAAP net losses, tax effect is expected to be 0% in 2017.