ExOne (XONE) is slated to report its second-quarter earnings on Monday after the market closes, and will host a conference call before the market opens on Tuesday. Going into the report, Wall Street expects the industrial 3D printing specialist to generate $11.1 million in revenue, and lose $0.26 per share.
Beyond the headlines, investors should also familiarize themselves with the underlying drivers of ExOne's business to help determine if the long-term investment thesis remains intact. In total, there are three major areas for investors to watch when ExOne reports earnings.
1. Machine sales
Considering ExOne has only sold slightly more than 200 of its industrial 3D printers during its entire existence, growing its network of 3D printers is crucial for the company to achieve long-term success.
In the first quarter, ExOne delivered six of its specialty 3D printers, but only recognized revenue for two of the machines. Suffice it to say, investors weren't very pleased about this development, as machine revenue plunged by 54% year over year, to $1.1 million, and caused the company to report breakeven gross profits.
The way that CEO Kent Rockwell explained it, the company doesn't recognize revenue around a sale or lease until a customer accepts installation of the 3D printer, which can be after the printer has already been paid for. In other words, installation didn't happen for four of the printers that ExOne shipped during the quarter. Overall, Rockwell anticipates three of these four 3D printers will be installed and converted into top-line sales this year, but it remains unclear if any will close in the second quarter.
2. Non-machines sales
ExOne's non-machine sales are primarily made up of material sales that its 3D printers consume, and 3D printing services the company offers to customers. The services aspect of this segment allows customers to take advantage of ExOne's binder-jetting technology, and have 3D-printed parts made by the company's in-house 3D printing experts. From a business perspective, offering 3D printing services gives ExOne an opportunity to showcase its technology to prospective customers, and could pave the way for future 3D printer sales.
Ideally, investors want to see ExOne's non-machine revenue grow consistently, because it suggests that the company is successfully increasing awareness and acceptance of its binder-jetting technology in the marketplace. As a frame of reference, ExOne's first-quarter non-machine sales grew by 18% year over year, to $5.7 million, an encouraging sign that ExOne's binder jetting technology continues to hold longer-term promise.
3. Cash burn rate
The rate that ExOne has been burning through cash relative to its cash on hand could become a problem if current burn rates persist. ExOne ended the first quarter with $30.1 million in cash on its balance sheet, and burned through $6.1 million during the quarter.
Source: ExOne.
At first-quarter cash burn rates, ExOne would burn through cash in a little more than a year, which clearly isn't sustainable. Although management has noted on several occasions that it expects to slow down its cash burn rate and will end the year with $25 million to $30 million in cash, investors should key into how much cash ExOne spent in the second quarter. After all, any divergence from this expectation could imply that ExOne may have to raise additional capital at a time when its stock is near historic lows.
All eyes on Monday
When ExOne reports earnings on Monday, investors should focus on how the underlying business is performing, rather than how investors react to the news. ExOne's machine sales, non-machine sales, and cash burn rate will likely be among the most important factors in considering whether the company is remaining on track.
