3D Systems Reports Third Quarter and Nine Months 2014 Financial Results

ROCK HILL, South Carolina, November 10, 2014 – 3D Systems (NYSE:DDD) announced today that its third quarter revenue grew $31.2 million, or 23%, from the prior year to $166.9 million on strong demand for its design, manufacturing and healthcare products and services, resulting in third quarter GAAP earnings of $0.03 per share and non-GAAP earnings of $0.18 per share. For the nine months ending September 30, 2014, revenue grew $107.6 million, or 30%, to $466.2 million, resulting in GAAP earnings per share of $0.09 per share and non-GAAP earnings per share of $0.48 per share.

The company’s order book increased by $14 million, or 44% sequentially, to $46 million and included a $4 million increase in printer orders in hand compared to the second quarter order book, further reflecting the robust demand for 3DS' products and services.

Strengthening demand for the company's leading design and manufacturing products was not enough to overcome the revenue shortfall that resulted from the company's continued manufacturing constraints for direct metal printers and the delayed availability of its newest consumer products. This restricted the company’s organic growth rate to 12% for the quarter.

"We are pleased that strengthening demand led to a 57% organic increase in unit sales of our design and manufacturing printers, but are disappointed that we failed to fully capitalize on the robust demand for our direct metal and consumer products," said Avi Reichental, 3DS' President and Chief Executive Officer. "Despite our efforts, we were not able to deliver these direct metal and consumer products as soon as we anticipated. Now that these availability gaps have been resolved, we expect our revenue growth rate to increase."

Third Quarter 2014 Revenue Highlights (compared to third quarter 2013): 

• Healthcare revenue increased 121% to $37.4 million driven by added services and capabilities. 
• Expanding expertise and footprint contributed to a 29% increase in services revenue.
• Design and manufacturing revenue increased 27% to $155.2 million on a 57% increase in units sold.
• Growing installed base and increased printer utilization fueled materials revenue growth of 18%.
• Delayed new products availability held consumer revenue to $11.8 million, but didn't impede higher bookings, which increased consumer backlog to $8.3 million.

Sequentially, materials gross profit margin rebounded to 73.1% and Quickparts gross profit margin expanded to 44.7%, despite greater drag from concentrated service bureau acquisitions during the quarter. Notwithstanding these gains, consolidated gross profit margin remained sequentially flat at 47.8% on the current sales volume and mix and the residual costs of manufacturing ramp up.

"While growing pains led to our revenue shortfall and pressured our gross profit margin, the fundamentals of our business are intact and our gross profit margins are poised to resume their expansion," continued Reichental.

The company effectively kept its non-GAAP operating expenses flat on a sequential basis, notwithstanding ongoing investments in R&D, sales, marketing and manufacturing capacity. The company generated $8.6 million of cash from operations during the third quarter and ended the quarter with $377.3 million cash on hand.

Recent Business Highlights:

• The company completed several acquisitions that add powerful synergistic technologies, domain expertise and complementary sales channels:
  • The company expanded its Quickparts capabilities during the third quarter through the acquisitions of American Precision Prototyping, American Precision Machining and Laser Reproductions. These service bureaus added to the company's expertise in aerospace and industrial applications and deepened 3DS geographic footprint in the U.S.
  • The company acquired LayerWise, advancing its leadership in direct metal 3D printing technology and the manufacturing of medical, dental and aerospace precision metal parts at convincing scale.
  • The company acquired Simbionix, the global leader in 3D virtual reality surgical simulation, extending its digital thread in healthcare from the training room to the operating room.
• The company entered into a $150 million five-year, unsecured revolving credit facility with its lenders with an option to increase the aggregate principal amount available under the Credit Facility by an additional $75 million.
• The company named Ted Hull, previously CFO of Fusion-io and VP Finance at Cisco, as its incoming Chief Financial Officer, effective November 11, 2014, succeeding Damon Gregoire, who will transition to the role of Executive Vice President, Mergers and Acquisitions. Ted’s career spans more than three decades of progressing financial leadership roles in fast-moving technology companies and high-profile sector leaders.
• The company appointed Mark Wright, previously a senior executive at EMC Corporation, as its Chief Operating Officer. In this new role, Mark will work closely with the company’s senior leadership to scale its commercial and manufacturing operations and leverage its recent investments into sustainable, profitable growth.
• The company elevated Kevin McAlea to the role of Executive Vice President and Chief Operating Officer, Healthcare. Kevin brings more than 20 years of 3D printing experience into this role and most recently oversaw the successful development of 3DS' direct metal printing business after it acquired Phenix Systems. Kevin will now be responsible for driving and executing 3DS' healthcare growth strategy.
• The company promoted Jeff Blank to the role of Vice President, Global Engineering and Chief Development Officer. Jeff recently joined 3D Systems through the acquisition of the Xerox Wilsonville engineering team that he led as Vice President Engineering. Jeff brings to 3DS decades of relevant engineering leadership expertise and, in this new role, he is leading 3DS global engineering team of 400 strong in 12 R&D locations.
• The company hired Peter Theran, previously a senior executive at Bose, to lead its consumer retail operations. In his role of Vice President, Consumer Retail, Peter's charter is to broaden the reach and penetration of the company’s latest consumer products, services and experiences, including the Cube 3 and CubePro printers and its expanding portfolio of perceptual devices and online Cubify experiences.

Reiterated Guidance for 2014
Factoring in its third quarter revenue shortfall and outlook for the remainder of the year, management reiterates its previously adjusted guidance for the full year 2014. Management expects revenue in the range of $650 million to $690 million, and GAAP earnings per share of $0.18 to $0.28 and non-GAAP earnings per share in the range of $0.70 to $0.80.

"The same accelerated investments in new technologies and acquisitions that pressured our short term performance also delivered the most comprehensive portfolio of self-developed and acquired 3D products and services available today. We believe we are now on a stronger footing as we shift toward fine-tuning these investments and leveraging them to achieve our long-term targets," concluded Reichental.

Q3 2014 Conference Call and Webcast
3D Systems plans to hold a conference call and simultaneous webcast to discuss its financial results for the third quarter and first nine months of 2014 on Monday, November 10, 2014, at 8:30 a.m. Eastern Time, and expects to file its Form 10-Q before market open on the same day. 

Date: Monday, November 10, 2014
Time: 8:30 a.m. Eastern Time
Listen via Internet: www.3dsystems.com/investor

Participate via telephone:
  Within the U.S.: 1-877-407-8291
  Outside the U.S.: 1-201-689-8345
  Participant code: 3D Systems

The recorded webcast will be available beginning approximately two hours after the live presentation at www.3dsystems.com/investor.

Forward-Looking Statements
Certain statements made in this release that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in the conditional or future tenses or that include terms such as "believes," "belief," "expects," "estimates," "intends," "anticipates" or "plans" to be uncertain and forward-looking. Forward-looking statements may include comments as to the company's beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors described under the headings "Forward-Looking Statements," "Cautionary Statements and Risk Factors," and "Risk Factors" in the company's periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements.

Presentation of Information in This Press release
To facilitate a better understanding of the impact that several strategic acquisitions had on its financial results, the company reported non-GAAP measures that adjust net income and earnings per share by excluding the impact of amortization of intangibles, non-cash interest expense, acquisition and severance expenses, litigation settlements, loss on conversion of notes and stock-based compensation expense. A reconciliation of GAAP to non-GAAP results is provided in the accompanying schedule.

About 3D Systems
3D Systems is pioneering 3D printing for everyone. 3DS provides the most advanced and comprehensive 3D design-to-manufacturing solutions including 3D printers, print materials and cloud sourced custom parts. Its powerful digital thread empowers professionals and consumers everywhere to bring their ideas to life in material choices including plastics, metals, ceramics and edibles. 3DS' leading healthcare solutions include end-to-end simulation, training and integrated 3D planning and printing for personalized surgery and patient specific medical and dental devices. Its democratized 3D design and inspection products embody the latest perceptual, capture and touch technology. Its products and services replace and complement traditional methods with improved results and reduced time to outcomes. These solutions are used to rapidly design, create, communicate, plan, guide, prototype or produce functional parts, devices and assemblies, empowering customers to manufacture the future.

Today its comprehensive range of 3D printers is the industry's benchmark for production-grade manufacturing in aerospace, automotive, patient specific medical device and a variety of consumer, electronic and fashion accessories.

More information on the company is available at www.3dsystems.com.