The 3D printing wars are heating up, with rivals Stratasys, Ltd. (NASDAQ:SSYS), 3D Systems Corporation (NYSE:DDD), and ExOne Co (NASDAQ:XONE) competing for market share and leadership within this developing industry.
Followers of the industry will recognize Exone as the new kid on the block, set to issue its first earnings report on March 27, 2013. Exone’s fourth-quarter report will likely set the tone for investor sentiment around this young company, and will either challenge or verify its $415 million enterprise value. This earnings call is the opportunity that Exone has been waiting for to impress Wall Street, and will be successful if it can nail these three key areas.
1. Number of units sold: Q4 and guidance
The number of units that Exone put into service in Q4, along with this unit guidance going forward, are the most vital figures of the earnings report. According to Exone’s prospectus, there were eight machines sold and shipped Q4, and these eight will definitely show up as revenue on the income statement.
Additionally, on the date of the prospectus distribution, six more machines had been ordered and undelivered. At the time of the prospectus, Exone was “presently evaluating each of the machine unit shipments” to determine how many of these six units could be recognized as revenue. If the company reports all of these 14 units as sold in the quarter, the total will be higher than the 13 Exone sold in all of 2010 (four), 2011 (also four), and the first three quarters of 2012 (five) combined.
Units sold guidance will be a huge determinant of how Exone shares react to earnings. Of the three analysts who follow the company, average expectations for sales growth in 2013 is 121% over 2012. It might sound crazy, but this number could be conservative.
We know that five units were sold in the first three quarters of 2012, and if we assume that 14 units were sold in Q4, the total for 2012 is 19. Excluding the impact of mix, sales growth of 121% would mean unit sales of 42 printers in 2013. With a Q4 run rate of 14 per quarter, and assuming no sequential growth within the year, Exone is already on pace to sell 56 units in 2013.
The major questions are if and how management will provide guidance. Will they provide detail on number of units sold in 1Q? Will they give full year guidance for units and sales? The greater the level of transparency executives provide, the more comfortable the market will be with financial results and the management team.
Which leads us to key area No. 2 …
2. Man
agement intangibles
Exone’s Q4 earnings call will be the first opportunity the Street has gotten to hear commentary from the management team since Exone went public. Investors and analysts already know that CEO Kent Rockwell is a veteran businessman and venture capitalist with a great reputation. But in order to exceed expectations, Rockwell and his team will need to show that Exone has a clear strategic vision and will identify drivers of shareholder value.
If financial results meet expectations and reasonable guidance is given, along with good management commentary, investors will be satisfied but not ecstatic. To surpass expectations, Exone management can display a very clear understanding of the numbers, and transparent guidance for all of 2013.
Rockwell and his team can show a robust understanding of the opportunities in the 3D printing market, and can outline specific vision for beating competition and gaining profitable market share. To fully impress investors, Exone management should look like the experts in the industry. By providing these valuable extras, management would earn credibility and gain the confidence of investors and analysts.
3. Industry discussion and analysis
With quality discussion regarding the 3D printing marketplace, Exone management can instantly create greater value for the company and the entire industry. 3D printing is new to the mainstream investment community, and much is still unknown about the potential of the industry. Any discussion by experts that casts a light on the changing world of 3D printing technology will resonate with analysts and investors.
According to its prospectus, Exone expects the 3D printing industry to be “much higher” in value than the $6.5 billion that a Wohlers Associates report projects. Any favorable updates to this industry expectation would push share prices higher for Exone, and likely elevate 3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS) as well.
Shares of 3D Systems Corporation (NYSE:DDD) are down 30% since the Exone IPO, and Stratasys, Ltd. (NASDAQ:SSYS) is flat. Exone is up an additional 15% since its IPO date, and it appears there is a rotation out of 3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS)and into Exone.
As I previously wrote here, Exone has advantages over its competitors in market segment and management, and the market is beginning to price Exone accordingly. The upcoming earnings report gives Exone a platform to broadcast their message loudly to Wall Street. If it nails these three key areas, Exone could become the new darling of 3D investors.
The article The 3 Keys to Exone’s First Earnings originally appeared on Fool.com.
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