3D Systems Corporation · NYSE:DDD
3D Systems — FY2006 Earnings Presentation
48 slides from 3D Systems's earnings presentation, May 1, 2007
Slide 1: Conference Call & Webcast Discussion of Fourth Quarter and Full Year 2006 Results
3D Systems Corporation Conference Call & Webcast Discussion of Fourth Quarter and Full Year 2006 Results May 1, 2007 NASDAQ: TDSC www.3dsystems.com
Slide 2: Welcome Webcast Viewers
Welcome Webcast Viewers If you wish to ask questions at the end of the conference call, you should register as “Interactive Teleconference.” If you did not register as “Interactive” and wish to participate, please follow the steps below: Check the icon marked “Phone Connection” on the toolbar at the
Slide 3: Participants
Participants Chanda Hughes Coordinator, Investor Relations Abe N. Reichental President & Chief Executive Officer Damon Gregoire Vice President & Chief Financial Officer Gerald J. Pribanic Interim Chief Financial Officer Robert M. Grace, Jr. Vice President, General Counsel & Secretary
Slide 4: Forward-Looking Statements
Forward-Looking Statements Certain statements made in this presentation 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, un
Slide 5: Operating Results
% =, Operating Results Leader Innovator Partner Builder . ‘5 SYSTEMS
Slide 6: Fourth Quarter 2006 Operating Results
Fourth Quarter 2006 Operating Results ($ Millions except per share amounts) NM=not meaningful Operating Results 2006 Actual Revenue $42.6 $44.0 (3%) Gross Profit $16.1 $20.5 (21%) 38% 47% Operating Expenses $21.4 $16.3 31% 50% 37% Net Income (Loss) Available to Common Stockholders ($6.0) $5.9 NM 13%
Slide 7: Fourth Quarter 2006 Gross Profit Margin
Fourth Quarter 2006 Gross Profit Margin ($ Millions) Gross profit margin decline due primarily to: Combined effects of lower revenue, inventory write-offs, ERP, supply chain and logistics disruptions Special accommodations extended to customers $ % Revenue $ % Revenue Yr-Yr % Products $14.2 44% $17.
Slide 8: Year End 2006 Operating Results
Year End 2006 Operating Results ($ Millions except per share amounts) NM=not meaningful Operating Results 2006 Actual Revenue $134.8 $139.1 (3%) Gross Profit $46.3 $62.2 (26%) 34% 45% Operating Expenses $71.9 $53.7 34% 53% 39% Net Income (Loss) Available to Common Stockholders ($30.7) $7.7 NM 5% Dep
Slide 9: 2006 Year-End Revenue by Category
2006 Year-End Revenue by Category ($ in Millions) $139.1 16.5% 36.4% 47.0% $134.8 16.5% 40.0% 43.5% $134.8 26.9% 38.6% 34.4% 39.6% 32.1% $139.1 28.3% Asia Pacific Europe North America Services Materials Systems & Other 0 20 40 60 80 100 120 140 2005 2006 2005 2006
Slide 10: 2006 Annual Revenue Component Changes
2006 Annual Revenue Component Changes ($ Millions) ($10.6) ($1.5) $134.8 $7.4 $0.5 $139.1 $125.0 $127.0 $129.0 $131.0 $133.0 $135.0 $137.0 $139.0 2005 Revenue Volume Core Products Price / Mix Volume New Products FX Effects 2006 Revenue
Slide 11: Year-End 2006 Gross Profit Margin
Year-End 2006 Gross Profit Margin ($ Millions) Gross profit margin decline due primarily to: Combined effects of lower revenue, inventory write-offs, ERP, supply chain and logistics disruptions Special accommodations extended to customers $ % Revenue $ % Revenue Yr-Yr % Products $39.3 40% $49.4 50%
Slide 12: Year End 2006 Operating Expenses
Year End 2006 Operating Expenses ($ Millions) 2005 Yr-Yr 2006 Restated Incr. Amt. Item SG&A 51.2 $ 40.3 $ 10.9 $ 5.7 $ Consulting 1.2 FAS 123R 1.5 Bad debt expense 0.6 Misc. expenses 1.2 Higher travel expense R&D 14.1 12.2 1.9 0.9 Symyx Restructuring 6.6 1.2 5.4 3.4 Relocation 71.9 $ 53.7 $ 18.2 $ $
Slide 13: 2006 Key Operating Results Trends
2006 Key Operating Results Trends ($ Millions) Operating & Net Income Revenue (Right axis) (Left axis) Net Inc (Loss) to Common Operating Inc (Loss) Revenue 1st QTR 2ND QTR 3RD QTR 4TH QTR (12) (7) (2) 3 8 13 18 10 15 20 25 30 35 40 45 50
Slide 14: 2006 Key Operating Results Trends
2006 Key Operating Results Trends (in millions) (20) (10) 0 10 20 30 40 50 QTR 1 QTR 2 QTR 3 QTR 4 (in millions) Revenue Gross Profit Operating Expenses Net loss
Slide 15: Full Year 2006 Cash Flow
$24.3 $7.7 Opening Balance Strategic Investments Operating Ending Balance 10 20 R&D Capex Etc. A/R, A/P Inventory Accruals ($ Millions) 30 5 15 25 Interest Dividends Borrowings Stk. Options Working Capital Financing ($24.8) Other $8.3 ($3.3) $2.0 $14.3 Enterprise Loss Net (1) (1)Enterprise loss befo
Slide 16: Full Year 2006 Cash Flow
$24.3 $7.7 Opening Balance Strategic Investments Operating Ending Balance 10 20 R&D Capex Etc. A/R, A/P Inventory Accruals ($ Millions) 30 5 15 25 Interest Dividends Borrowings Stk. Options Working Capital Financing ($24.8) Other $8.3 ($3.3) $2.0 $14.3 Enterprise Loss Net (1) (1)Enterprise loss befo
Slide 17: Full Year 2006 Cash Flow
$24.3 $7.7 Opening Balance Strategic Investments Operating Ending Balance 10 20 R&D Capex Etc. A/R, A/P Inventory Accruals ($ Millions) 30 5 15 25 Interest Dividends Borrowings Stk. Options Working Capital Financing ($24.8) Other $8.3 ($3.3) $2.0 $14.3 Enterprise Loss Net (1) (1)Enterprise loss befo
Slide 18: Full Year 2006 Cash Flow
$24.3 $7.7 Opening Balance Strategic Investments Operating Ending Balance 10 20 R&D Capex Etc. A/R, A/P Inventory Accruals ($ Millions) 30 5 15 25 Interest Dividends Borrowings Stk. Options Working Capital Financing ($24.8) Other $8.3 ($3.3) $2.0 $14.3 Enterprise Loss Net (1) (1)Enterprise loss befo
Slide 19: Full Year 2006 Cash Flow
$24.3 $7.7 Opening Balance Strategic Investments Operating Ending Balance 10 20 R&D Capex Etc. A/R, A/P Inventory Accruals ($ Millions) 30 5 15 25 Interest Dividends Borrowings Stk. Options Working Capital Financing ($24.8) Other $8.3 ($3.3) $2.0 $14.3 Enterprise Loss Net (1) (1)Enterprise loss befo
Slide 20: Reconciliation of Cash Flow
Reconciliation of Cash Flow* ($000’s) *This reconciliation is provided to satisfy the requirements of Regulation G promulgated by the SEC regarding the use of non-GAAP financial measures. (Unaudited) Per Strategic Working Form 10K Investment Capital Operating Financing Other Adjusted Cash flows from
Slide 21: Working Capital Management
Working Capital Management Days 91 74 Days Sales Outstanding Days Inventory on Hand 68 57 40 50 60 70 80 90 100 110 120 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006
Slide 22: Bottom line
Bottom line We have experienced significant business setbacks and disruptions in the course of implementing our strategic initiatives that we believe are now behind us We are pleased with our continued strong order booking progression We are gratified with the sequential come back we are making We a
Slide 23: Business Update
Business Update Leader Innovator Partner Builder d ‘23° SYSTER
Slide 24: Growth Infrastructure
Growth Infrastructure Consolidated HQ and R&D facility Oracle-based ERP system Exclusive materials’ development agreement with Symyx Systems’ assembly operations outsourced to integrated suppliers Proprietary materials’ production consolidated in Marly, Switzerland Supply chain outsourcing to UPS Ex
Slide 25: 2003 Core Products: 3D Modeling and Rapid Manufacturing
3D Modeling 2003 Core Products Price ~ $200K-650K Rapid Manufacturing 2003-2007 Progress
Slide 26: 2007 Current Products
2007 Current Products Price ~ $10K-850K Growth Investments Alliances Infrastructure 2003-2007 Progress
Slide 27: Pain of Progress!
Pain of Progress! Parts availability Delivery reliability Out-of-box quality Performance and up time Service response time Call center wait and response time Installation duration Operating losses Financial restatement Organizational knowledge Customer Disruption Business Disruption
Slide 28: Gains Of Progress
Gains Of Progress Material Revenue
Slide 29: 2006 Significant Events
2006 Significant Events Enhanced the performance of Viper™ Pro SLA® Sinterstation® Pro SLS® Systems Introduced new digital dentistry system, the InVision® DP (Dental Pro) System Introduced several new engineered materials and composites Continued outsourcing non-core activities Continued pruning our
Slide 30: Product Portfolio: Systems and Materials
Visiiet® SR Plastic ! { InVision® HR 3-D Modeler ay InVision® x7 3-0 Modeler (i) Visilet® HR Plastic Invision® DP 3D System VisiJet® DP Plastic ‘Manufacturing System ‘30 SYSTEMS
Slide 31: V-Flash Desktop Modeler
V-Flash™ Desktop Modeler ™ Disruptive Technology Platform 2-3X Faster than other 3-D Printers Priced @ $9,900 SLA®-like Part Quality User Friendliness Plug-and-play spare parts User installable assemblies Disposable V-Flash™ Cartridge Disposable build pad On-board and web diagnostics User-Friendly O
Slide 32: Partnership with World-Class Leaders – Dreve
Partnership with World-Class Leaders – Dreve Announced first economical, high-speed desktop manufacturing system for hearing aids Based on 3D Systems’ new, disruptive Film Transfer Imaging (FTI) technology Builds high-quality hearing aid shells within hours – improved efficiency Will provide multipl
Slide 33: InVision XT 3-D Modeler
InVision® XT 3-D Modeler Fast and productive High output of ready-to-use models High-definition, functional and durable models Ideal for rigorous handling & testing and form & fit analysis Material Color variety Reaches wider range of application Compact Office friendly – no special facility require
Slide 34: Rapid Manufacturing Progress
Rapid Manufacturing Progress
Slide 35: Parts Consumption Drives Demand
Parts Consumption Drives Demand Source: Wohlers Report and 3D Systems
Slide 36: Partnership with World-Class Leaders – Tangible Express
Partnership with World-Class Leaders – Tangible Express First fractional ownership program in the industry Delivers 3D Systems’ technology and quality to more users Manufacturing capacity without the associated operating costs Owners pay for what they need when they need it Fractional fleet of 13 SL
Slide 37: Why Settle For a Mimic?
Why Settle For a Mimic? Own a Slice of The Real Deal Pro Parts at a Fraction! FDM from Stratassys Ownership Slice from TE PolyJet from Objet Sterolithography from 3D
Slide 38: Comprehensive Competitive Cards
Comprehensive Competitive Cards Portfolio Presence and Penetration Underscores Our Competitive Advantage Technology Leadership Materials Manufacturing Presence Verticals Four Proprietary Technology Platforms > All Competitors Worldwide Combined Shaping the Future with Disruptive Technologies Extensi
Slide 39: Expect Business Fundamentals to Improve
Expect Business Fundamentals to Improve Profitability Execution Working Capital Average Selling Prices expected to be maintained Cost Of Goods Sold impacted by friction costs, expected to improve Special Operating Expenses reflect relocation, ERP, restatement, SOX Gross Profit expected to return to
Slide 40: Improving Revenue Mix and Profitability
Improving Revenue Mix and Profitability Leveraging Volume, Productivity, Mix, Retention and Fixed Costs to Maximize Profitability Materials: Highest margin in the mix: growing 17+% Service: Lowest margin in the mix: flattening Systems: New systems growing at attractive margins Rapid Manufacturing: D
Slide 41: In Conclusion
In Conclusion We made good progress in resolving the causes of the business disruptions and the material weaknesses that have adversely affected our operations since the second quarter of 2006. We incurred most of the costs of our strategic initiatives and disruptions. We incurred abnormally high ex
Slide 42: Increasing Stockholder Value: Long Term Target Model
Increasing Stockholder Value For a Business in Our Space at $150 Million Revenue Achieving Sustained Profitability Long Term Target Model Lo Revenue 100% Gross profit 50-55% Operating expense 30-35% Operating income 15-25% Net income available to common stockholders 10-15% Depreciation and amortizat
Slide 43: Business Model Strengths
Business Model Strengths Leading industry position through technology Dedicated business units focused on customer success Clear priorities for sustained profitable growth Powerful brands deep customer relations diverse base Vertical success Global presence and reach Differentiated product portfolio
Slide 44: Shaping The Future Through Complete Solutions Continuum
Shaping The Future Through Complete Solutions Continuum
Slide 45: Question & Answer Session
Out of respect for other conference call participants, please ask one question and then return to the queue to ask additional questions. All questions must be directed through the teleconference portion of this call. Questions via the web will not be accepted. Question & Answer Session
Slide 46: Thank You for Participating
Thank You for Participating A recording of this Webcast will be available two hours after completion of the call for three days. To access the recording, dial 1-800-642-1687 (or 706-645-9291 from outside the United States) and enter 7803123, the conference call ID number. A replay of this Webcast wi
Slide 47: 3D Systems University
17,000 sq. ft. state-of-the-art 3D Systems University Funded and maintained by York Technical Institute 2-year Engineering Degree in Rapid Manufacturing Provide employee and customer training Enabling Environment For Growth
Slide 48: Building V-Flash 3-D Modeler Community
Building V-Flash™ 3-D Modeler Community www.modelin3d.com