ExOne Earnings Preview: 3 Areas to Watch

By Markets Fool.com

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A 3D printed design. Source: ExOne.

Industrial 3D printing specialist ExOne is set to release its fourth-quarter and 2014 full-year earnings on Monday after the market closes, and will hold a conference call to discuss the results on Tuesday before the market opens.

Going into the report, Wall Street anticipates that ExOne's fourth quarter generated $18.5 million in revenue and an earnings loss of $0.05 per share. For the full year, the consensus estimate expects ExOne will have generated $46.8 million in revenue and an earnings loss of $1.07 per share.

Looking beyond the headline figures, investors should also home in on how ExOne's underlying business is performing to determine if the long-term investment thesis remains intact. The following areas will allow investors to assess how business fared at ExOne during the fourth quarter.

1. Machine revenue
In the third quarter, ExOne's machine revenue, or 3D printer sales, plunged by 46% year over year, due to multiple order shipment delays, which forced the company to miss out on realizing $4 million to $5 million in additional revenue.

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Fortunately, CEO Kent Rockwell highlighted during ExOne's third-quarter conference call that the company hasn't lost any customers from these delays, and expects the held-up orders will be shipped in the fourth quarter. If all goes according to plan, and ExOne ships these held-up orders, management also expects that the fourth-quarter machine revenues will break company records.

An example of what kinds of parts ExOne's service centers can produce. Source: ExOne.

2. Non-machine revenue
In recent years, ExOne has started placing a greater emphasis on growing its non-machine revenue, or the sales it generates from being hired by customers for 3D-printing parts through its expanding worldwide presence of 3D printing service centers, of which there are currently eight.From a business perspective, offering 3D printing services to customers gives ExOne an opportunity to showcase the capabilities of its binder jetting technology, and could also lead to future sales of its 3D printers.

The service center strategy appears to be paying off, with non-machine revenues increasing by 42% year over year in the third quarter, accounting for the majority of the company's total revenue during the period. As far as investors are concerned, a slowdown in service center activity could indicate that acceptance of ExOne's binder jetting technology is waning, which could be material to the long-term investing thesis.

3. Gross profit margin
During the third quarter, ExOne's gross margin collapsed by 19.4 percentage points year over year to 25.8%, thanks largely to those product shipment delays, which contributed to an unfavorable margin mix between machine and non-machine revenue, and also the reality that the company operates more 3D printing service centers worldwide than it did a year ago.

XONE Gross Profit Margin (Quarterly) Chart

XONE Gross Profit Margin (Quarterly) data by YCharts.

Because management expects those delayed shipments will ship in the fourth quarter, investors should look for an improvement in gross margin on a sequential basis, which would help alleviate concerns about other underlying issues related to ExOne's profitability prospects.

All eyes on Monday
Come Monday, investors will have another opportunity to see how ExOne's underlying business is performing to determine whether the long-term investment thesis remains on track. Monitoring ExOne's machine and non-machine revenue, as well as its gross profit margin, are great ways to start the process.

The article ExOne Earnings Preview: 3 Areas to Watch originally appeared on Fool.com.

Steve Heller owns shares of ExOne. He will continue holding his shares for as long as the underlying fundamentals remain intact. The Motley Fool recommends and owns shares of ExOne. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.