Is ExOne’s Full-Year Guidance Realistic?

ExOne’s First Half Was WeakCompared to the first six months of last year, ExOne’s

total sales fell 17% to $15.3 million.

Despite this weakness, management reaffirmed its full-year guidance of generating $58 million to $66

million in sales this year.

To meet full-year guidance, ExOne will have to generate $42.7 million to $50.7 million in second-half

sales.

Calling for Serious Growth

Management expects second-half sales to increase by 68% to 100% over the same period last year.

The Million-Dollar Question

Is ExOne’s full-year guidance realistic?

How ExOne Recognizes RevenueExOne doesn’t recognize revenue on its income statement

from a 3D printer sale until after it’s “accepted” by a customer.

ExOne defines “accepted” as the printer being installed, made operational, and the customer is adequately trained.

There could be several quarters of delay between when ExOne sells a 3D printer and books the sale, even if it’s

already been paid for by the customer.

Unrecognized Revenue Plagued the First Half

In the first quarter, ExOne shipped six 3D printers, but only recognized two as sales.

In the second quarter, ExOne shipped 12 printers, but only recognized seven as sales.

Unrealized Printer Sales

Source: ExOne.

3D Printers Sales Waiting in the Wings

After the first half, there are six 3D printers that could be booked as sales in the second half.

Model Unrecognized Units

Exerial 4

S-Max+ 1

S-Max 1

Crunching the Numbers

One CaveatManagement previously noted that the four Exerial

machines were sold at about a 50% discount to list price because the European buyer was helping fund the development of the product line and the euro has

weakened.

Crunching the Numbers

ModelUnrecognized

UnitsApproximate

List Price Known DiscountTotal Revenue

Potential

Exerial 4 $1.8 million 50% $3.6 million

S-Max+ 1 $1.4 million $1.4 million

S-Max 1 $1.1 million $1.1 million

Total 6 $6.1 million

Crunching the NumbersIf customers accept the six recognized units before year end, ExOne will generate approximately $6.1

million in revenue during the second half.

ExOne would need $36.6 million more in revenue to hit the lower end of its full-year guidance.

Other Sources of RevenueInventory

ExOne has accumulated nearly $21.9 million of inventory on its balance sheet.

It has taken ExOne 135 days to 245 days to turn its inventory on hand into sales in the past year.

To meet its full-year guidance, the faster that ExOne can turn over its inventory, the better.

Other Sources of Revenue

Order BacklogAt the close of 2014, ExOne had $13.2 million in its order backlog and noted it would be fulfilled

during 2015.

During the first half, ExOne sold $3.5 million of 3D printers, leaving up to $9.7 million in its backlog.

Other Sources of Revenue

Order BacklogHow much of ExOne’s backlog is printers and how

much is printing services is unknown.

Investors also shouldn’t double-count the $6.1 million in unrecognized revenue that ExOne

stands to realize once customers accept the six 3D printers it already shipped during the first half.

Other Sources of Revenue

Order BacklogAt most, there’s $3.6 million remaining in ExOne’s

order backlog from the end of last year.

$13.2 million backlog – $3.5 million first-half sales – $6.1 million unrecognized sales $3.6 million

Other Sources of Revenue

Non-Machine RevenueExOne’s first-half non-machine revenue increased by 16.8%

year over year to $11.8 million.

ExOne has consistently grown its non-machine revenue since becoming a public company.

Investors can reasonably expect ExOne to generate at least the same level of non-machine revenue it did during the first half in

the second half.

Adding Up the Second HalfRevenue Source Estimated Potential

Six unrecognized, already shipped 3D printers

$6.1 million

Inventory on hand $21.9 million

Order backlog, net of first-half sales and six unrecognized printers

$3.6 million

Non-machine revenue $11.8 million

Total $43.4 million

RecapTo meet the lower end of its full-year guidance, ExOne has to generate $42.7 million in second-

half sales.

To get there, ExOne will have to book all or most of its unrecognized revenue, turn over the majority of

its inventory, fulfill the remainder of its order backlog, and generate similar, if not better, non-machine revenue as it did during the first half.

Is Management Being Realistic?

Although it’s not impossible, ExOne would have to execute better in the second half

than it ever has as a public company.

Considering ExOne shares are trading near all-time lows, investors aren’t giving

management the benefit of the doubt.

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