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ExOne 2Q16 results ?2

09:53 10-Aug-16

The ExOne conference call has just wrapped up. Management talked about (cautious) optimism, but is unwilling to provide guidance.  There was really nothing to change my initial take on the quarter.  Though cash increased slightly, that will probably reverse in the current quarter and EBITDA still negative, though decreased to negative $1.4M. 

The company and business is maturing, and it's good to not see any further fumbles in operations, but it's still an open question as to whether sales can out-pace spending.  The company is nowhere near capacity and has had to reduce prices of its consumables.  It has also discontinued some product lines and shuttered its Auburn facility in order to cut costs.  Sales growth in the face of the continued high operational costs will be the big question going forward. 

The high operational costs are necessary because of the shift to cold hardening phenolic binders that I had already projected.  Adding to that is the introduction of sodium silicate binders, to enable more environmentally friendly operations. The company will also have to continue reducing the size of its powders.  It has moved from 60 to 30 micron granules so far, with 5-10 micron sizes ahead. As a result, R&D spend was up to $1.9M and will have to remain high or quite possibly increase.  This would be fine in the face of robust demand, but despite management spin, that's questionable:

• the 3-year Missile Defense contract will have lumpy revenue recognition, based on milestones, with little or no impact to the bottom line.
• There are still no Exerial sales on the books, and no projection on revenue recognition for the 4 beta machines that are in the field.  Management talks of automotive interest, but concedes that is multiple years out.
  
• Similarly, management talks about penetrating the NIMS industry, but not in any quantified way.
  

I expect the current quarter report to wind up being something of a mirror image of this one, with slightly higher expenses and less income.  The fourth quarter report is likely to have bigger impact, one way or the other, as it is typically a high point for the company.  This quarter increases the hope that ExOne will be able to continue struggling along without dilution, but struggling along is not what investors were looking for.

ExOne has announced its financial results for the second quarter:

• a loss of 18 cents per share beats by 10 cents
  
• on revenue of $11.8M, which  by beats by $700K.
  

This is better than recent reports, but not good enough in my opinion.  Guidance is notably absent and will probably come as part of the conference call tomorrow morning.  Instead, management continues to highlight the backlog rather than operational losses.

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