Slide 1: Conference Call & Webcast Discussion of Second Quarter 2008 Results
Conference Call & Webcast Discussion of Second Quarter 2008 Results August 6, 2008 NASDAQ: TDSC www.3dsystems.com
Slide 2: Participants
2 Participants Chanda Hughes Coordinator, Investor Relations Abe N. Reichental President & Chief Executive Officer Damon Gregoire Vice President & Chief Financial Officer Bob Grace Vice President & General Counsel
Slide 3: Welcome Webcast Viewers
3 Welcome Webcast Viewers To listen to the conference via phone and to ask questions during our Q&A session, please dial: 1-888-336-3485 in the United States 1-706-634-0653 from outside the United States We will not accept questions through the Web site or "Audio Streaming."
Slide 4: Forward-Looking Statements
Leader Innovator Partner Builder 4 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
Slide 5: Operating Results
5 Operating Results Abe Reichental President & CEO
Slide 6: Second Quarter 2008 Operating Results
6 Operating Results Second Quarter Second Quarter % Change Operating Results 2008 2007 % Change Revenue $36.7 $36.4 1% Gross Profit % of Revenue $13.3 36% $13.5 37% (1%) Operating Expenses % of Revenue $16.1 44% $18.4 51% (12%) Net Loss ($3.3) ($5.3) 37% Depreciation & Amortization % of Revenue $1.8
Slide 7: Six Months 2008 Operating Results
7 Operating Results Six Months Six Months % Change Operating Results 2008 2007 % Change Revenue $68.4 $73.4 (7%) Gross Profit % of Revenue $26.7 39% $29.4 40% (9%) Operating Expenses % of Revenue $32.8 48% $36.4 50% (10%) Net Loss ($7.0) ($8.4) 17% Depreciation & Amortization % of Revenue $3.1 5% $3
Slide 8: Factors Shaping 2Q08 Results
Revenue shortfall of $4 million compared to our mid-June expectations: Growth from Integrated Materials Sales Traction from commercial shipments of recently introduced 3-D Printers Abnormally higher used-equipment sales Lower unit volume from sales of Large-Frame systems Higher deferred service and
Slide 9: Factors Shaping 2Q08 Results: Integrated Materials
9 2008 2008 % Change Q2 Q1 % Change Total Materials Sales $16.2 $14.9 9% Integrated Materials Sales $4.2 $3.2 32% Integrated Materials % of Total Materials Sales 26% 22% ($ Millions ) Integrated Materials sales increased by 32% sequentially over the first quarter of 2008. Integrated Materials grew t
Slide 10: Financial Review
10 Financial Review Damon Gregoire Vice President & CFO
Slide 11: 2Q08 Revenue Mix By Category and Region
2Q08 Revenue Mix By Category and Region 5 10 15 20 25 30 35 0 Millions 35% 41% 24% 31% 44% 25% 46% 41% 13% 44% 41% 15% 2007 2008 2007 2008 Services Materials Systems & Other Asia Pacific Europe North America $36.4 $36.7 $36.4 $36.7 40 11
Slide 12: 2Q08 Gross Profit Margin
12 2Q08 Gross Profit Margin ($ Millions) Items affecting gross profit margin in 2Q08 (with estimated margin impact indicated): Lower systems unit volume resulting in absorption of overhead over fewer units Higher concentration of used equipment sales, resulting in lower margins (200 bps) Higher mate
Slide 13: Six Months 2008 Gross Profit Margin
13 Six Months 2008 Gross Profit Margin ($ Millions) Changes in gross profit margin due to: Lower systems unit volume resulting in absorption of overhead over fewer units Higher concentration of used equipment sales, resulting in lower margins Higher materials' revenue with higher gross profit Advers
Slide 14: 2Q08 Operating Expenses
2Q08 Operating Expenses ($ Millions) SG&A R&D Total Operating Cost $12.6 $ 3.6 $16.1 2008 $18.4 $14.9 $ 3.5 2007 Expect SG&A expenses in 2H 2008 to fall in the range of $24 MM to $26 MM Expect R&D expenses in 2H 2008 to fall in the range of $7 MM to $8 MM (12%) (16%) Yr-Yr % 1% 14 Contract Labor and
Slide 15: Six Months 2008 Operating Expenses
Six Months 2008 Operating Expenses ($ Millions) SG&A R&D Total Operating Cost $25.6 $ 7.2 $32.8 2008 $36.4 $29.8 $ 6.6 2007 Expect SG&A expenses in 2H 2008 to fall in the range of $24 MM to $26 MM Expect R&D expenses in 2H 2008 to fall in the range of $7 MM to $8 MM (10%) (14%) Yr-Yr % 8% 15 Contrac
Slide 16: Days Working Capital Management Progress
16 40 60 80 100 120 140 160 Days Working Capital Management Progress Days Inventory On Hand Days Sales Outstanding Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 68 64 131 101 100 68 74 78 93 67 65 116 90 95 121 73 102 70
Slide 17: Inventory
17 Inventory ($000's) 2Q 2008 increase due to $3.7 million materials' and systems' purchases to support future growth, including direct metals systems, 3-D printers (V-Flash(r) modeler), and certain key components to support future production of 3-D printers. Except for the 2Q08 inventory investment
Slide 18: Cash Position 6/30/2008
18 Cash Position 6/30/2008 ($000's) 2008 2008 Total Q1 Q2 Total Inventory and Asset Investments Include: Tangible Express Other Inventory Other Capex ($5,300) ($1,562) ($1,882) $1,100 ($1,827) ($1,362) ($4,200) ($3,389) ($3,244) Exercise of Stock Options Other $1,081 ($94) $10 ($744) $1,091 ($838) N
Slide 19: Progress Report
19 Progress Report Abe Reichental President & CEO
Slide 20: State of Business
20 State of Business We believe and expect that: Notwithstanding the uncertain current economic climate, our sales recovered somewhat in the second quarter of 2008, and we are well positioned to gain additional lost ground in the coming quarters. Our growing installed base, coupled with the integrat
Slide 21: V-Flash Desktop 3-D Printer Update
We did not recognize revenue during the first half of 2008 from any V-Flash(r) activities. We commenced selected shipments of V-Flash(r) desktop modelers in early July after successfully resolving the electrical noise problems that previously halted this phase. Consistent with our previously announc
Slide 22: Revenue Upside to Reverse First-Half Shortfall
Revenue Upside to Reverse First-Half Shortfall Opening the Japanese marketplace to our key Accura(r) materials Commercial shipments of two new professional, high-definition 3-D printers: The ProJet(tm) HD 3000 3-D Production System The ProJet(tm) DP 3000 3-D Dental Professional System Commercial shi
Slide 23: Additional SG&A Reduction Initiatives
Additional SG&A Reduction Initiatives Curtail certain budgeted discretionary expenses Absence of certain special accounting costs Conclusion of contractor provided services Receipt of available South Carolina job development incentives Normalize annual audit and tax review cost Absence of expansive
Slide 24: Gross Profit Improvement Plan Update
Gross Profit Improvement Plan Update Profit Leakage Source Inefficient third-party logistics and warehousing. Material weaknesses related to inventory management. Inefficient parts return system inflating inventory and cost of goods. Premature failures of warranty parts supplied by third parties. Ne
Slide 25: Progress Against Our Long-Term Target Model
Progress Against Our Long-Term Target Model (% of Yearly Revenue, $ in millions) 25 We believe that continued integrated materials revenue growth coupled with the decline of SG&A and the realization of our gross profit improvement plan will result in returning and exceeding our historical performanc
Slide 26: Bottom Line: Transitioning From Restructuring To Profitable Growth
Leader Innovator Partner Builder 26 Bottom Line Transitioning From Restructuring To Profitable Growth 26 Meeting customers' needs. Leading in innovation through technology. Improving financial strength and flexibility. Developing new products and categories. Growing globally. Creating new marketplac
Slide 27: Question and Answer Session
Question and 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. 27
Slide 28: Thank You For Participating
Thank You For Participating A recording of this webcast will be available two hours after completion of the call. To access the recording, dial 1-800-642-1687 (or 706-645-9291 from outside the United States) and enter the confirmation code 55872360. A replay of this webcast will be available approxi