ExOne (NASDAQ:XONE) reported its second-quarter earnings after the market closed yesterday and hosted a conference call about the results this morning. During the quarter, ExOne's revenue decreased by 24% year over year to $8.5 million, translating to a $0.48 loss per share. Wall Street was expecting ExOne to generate $11.1 million in sales and lose $0.26 per share.

Although ExOne maintained its full-year guidance of generating between $58 million and $66 million in revenue, it lowered its full-year gross margin target from 36%-40% to 30%-34%, citing higher-than-expected costs and inefficiencies getting its newer production service centers and management system up and running.

Digging into the release, ExOne struggled to recognize revenue related to 3D printers it shipped during the quarter, its non-machine revenue continued to experience growth, and it burned through 18% of the cash it had on hand.

1. Machine sales fall 60%
In the first quarter, when ExOne shipped six 3D printers, but only recognized revenue on two of them, it raised an issue with how the company recognizes top-line sales. Essentially, there could be several quarters of delay between when one of ExOne's 3D printers is shipped and when the company books the sale, because it only recognizes revenue after a 3D printer is accepted by a customer, meaning the printer has been installed, made operational, and the customer has been adequately trained.

Management reiterated this dynamic on the earnings call this morning, likely because the company shipped 12 printers in the second quarter, but only recognized revenue for seven machines.

Image source: ExOne.

Consequently, ExOne's machine revenue fell by 60% year over year to $2.4 million, yet its deferred revenue and customer prepayments account on its balance sheet increased by 86% sequentially to $4.8 million.

In the earnings release, CEO Kent Rockwell said, "We currently believe that a primary indicator of demand for our technology is machines placed into service, rather than solely revenue recognition of sales."

2. Non-machine revenue grows 16%
ExOne's non-machine revenue, which is primarily comprised of materials sales that its printers consume and 3D printing services it offers to customers, grew by 16% year over year and 7% sequentially to $6.1 million, a new quarterly record.

Image source: ExOne

Although non-machine revenue growth has slowed from previous quarters, the underlying growth still suggests that ExOne's binder jetting technology continues to gain acceptance across the industry, which paves the way for potential 3D printer sales in the future.

3. Cash balance dips below guidance range
ExOne burned through $5.3 million of its cash during the quarter and ended with $24.8 million, slightly below its guidance of finishing the year with $25 million to $30 million in cash.

Before investors hit the panic button, the company has a number different ways it can increase its cash balance, including slowing its cash burn rate while converting shipped 3D printers into sales that haven't already been paid for, turning over some of the $21.9 million of inventory it's accumulated, and raising additional funds.

As the following table illustrates, ExOne's capital expenditures for the year are nearly done, meaning ExOne's spending should be significantly lower in the second half:

Image souce: ExOne.

Looking ahead
Compared to the first six months of last year, ExOne's total sales fell 17% to $15.3 million. In order for ExOne to reach its full-year sales guidance of $58 million to $66 million, it implies that the company will have to generate between $42.7 million and $50.7 million in second-half sales. This represents an increase of about 68% to nearly 100% annual revenue growth over the $25.4 million it generated during its second half of last year.

No matter how investors cut it, ExOne is expecting some serious revenue growth in the next six months.