ExOne didn't sell many of the machines that use these materials in the first quarter. Source: ExOne.

This is exactly what happens when a small company like ExOne Co (NASDAQ:XONE) only bills customers for two of the six machines it delivered in the first quarter. Sales of $6.8 million fell short of Wall Street expectations, and had a pretty big impact on margins.

In what Mister Market will (understandably) view as another disappointing quarter, ExOne revenue declined 7%, entirely because of the more than 50% drop in machine revenue from the year-ago quarter. The highlights:

  • Non-machine (parts, service, supplies) revenue increased 18%; when adjusted for currency exchange it grew 26%. 
  • Zero dollars in gross profit in the quarter. 
  • Net loss increased by $2.2 million, to $7.7 million in the quarter. 

By most measures, this wasn't a very good quarter at all; but as I mentioned in the earnings preview, this is a time of transition for the company, and it's more important to focus on trends than on a single quarter's results. But with that said, there wasn't much of anything that didn't move in the wrong direction this quarter. Let's take a closer look. 

Machine sales: Lumpy or stagnant?  
ExOne highlighted the fact that it had delivered six machines in the first quarter, even though it only billed for two. Of the other four, CEO Kent Rockwell said in the release that the company expects three will close as sales in 2015. Considering that two are leases, and the other two were simply delivered, that indicates that one of the leased machines will convert to a sale, and that the two delivered-only will close as sales, leaving the second leased machine remaining in that status. 

But any way you slice it, this certainly reinforces the notion that the second half of the year will be heavily backloaded with sales. If it's not, then ExOne may have some troubles on its hands. 

Non-machine business continues to grow 
While machine sales remain either lumpy or stagnant -- depending on your point of view -- non-machine sales continue to gain traction. This is a combination of parts and materials sold to customers with machines, as well as 3D-printed components that the company generates and sells to customers. Whether it's customers with printers buying supplies, or customers paying ExOne to print parts, it's critically important that this segment of the business continue to grow, and relatively steadily. 

The bottom line is that these kinds of sales should never be as up and down as the machines business because customers will regularly need to replenish their supplies, and the demand for 3D-printed components should continue to grow as potential customers learn about the capabilities. 

Non-machine revenue was slightly up from the fourth quarter, as well, continuing the trend of sequential growth that the company has reported since going public. The sequential growth rate has slowed in the past three quarters, though, and that bears watching. 

Cash position 
For ExOne, this is one of the key metrics to follow closely. The company started 2014 with $98 million in cash and equivalents, but ended it with $36 million. Of that $62 million burn, almost half of it funded capital expenditures:

So far this year, the company has spent $1.77 million in capex, helping reduce cash burn to around $6 million in the quarter versus last year's $15.5 million per-quarter burn rate. At the current rate, that would leave the company with roughly five quarter's worth of cash before liquidity is a real problem. In last quarter's earnings presentation, the company said it would finish 2015 with between $25 million and $30 million. 

Looking ahead 
Management once again reaffirmed its guidance for the full year:

Source: ExOne Q4 earnings presentation. 

Rockwell emphasized on last quarter's call that the second half of the year would be much bigger, and it's looking like that will have to be the case for the company to have a shot at making its forecast for the year. In fairness, management has been clear that the first quarter would be the slowest by far, and that machine sales are expected to escalate in the second quarter, and again in the second half of the year. 

After the just-released results, it looks like shareholders will have to take it on faith that it plays out how management is saying it will.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.