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Edited Transcript of XONE earnings conference call or presentation 17-Mar-17 12:30pm GMT

Thomson Reuters StreetEvents

Q4 2016 ExOne Co Earnings Call

North Huntingdon Mar 17, 2017 (Thomson StreetEvents) -- Edited Transcript of ExOne Co earnings conference call or presentation Friday, March 17, 2017 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Karen Howard

Kei Advisors LLC - IR

* Jim McCarley

ExOne Company - CEO

* Brian Smith

ExOne Company - CFO & Treasurer

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Conference Call Participants

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* Dan Drawbaugh

FBR Capital Markets - Analyst

* Saliq Khan

Imperial Capital - Analyst

* Jon DeCourcey

Canaccord Genuity - Analyst

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Presentation

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Operator [1]

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Greetings and welcome to the ExOne company fourth-quarter and full-year 2016 financial results conference call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Karen Howard, Investor Relations for ExOne. Thank you. Please go ahead.

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Karen Howard, Kei Advisors LLC - IR [2]

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Thank you, Jana and good morning, everyone. We appreciate your time today for our fourth-quarter and 2016 financial results conference call.

On the line with me today are Jim McCarley, our Chief Executive Officer and Brian Smith, our Chief Financial Officer and Treasurer. Jim and Brian will be reviewing the results that were published in the press release distributed after yesterday's market close. If you don't have that release, it's available on our website at www.ExOne.com. The slides that will accompany our discussion today are also posted on our website.

Referring to the slide deck, on slide 2 is our Safe Harbor statement. As you may be aware, we may make some forward-looking statements during this presentation and may also do so during the Q&A. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ from where we are today.

These risks and uncertainties and other factors are provided in the earnings release, as well as in other documents filed by the Company with the Securities and Exchange Commission. These documents can be found on our website or at www.SEC.gov.

I also want to point out that, during today's call, we may discuss some non-GAAP financial measures, which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of comparable GAAP to non-GAAP measures in the tables accompanying today's earnings release.

Jim will get started with some observations about the business and directional changes. Brian will go through the detailed review of the financial results and then will turn it back to Jim to offer perspective on our outlook before we open up the line for questions and answers.

And with that, it's my pleasure to turn the call over to you to begin, Jim.

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Jim McCarley, ExOne Company - CEO [3]

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Thank you, Karen and good morning, everybody. I want to start the discussion today taking a minute to state the approach we have taken to evaluate the business. First off, there are three business principals I expect for myself and the rest of the organization. Number one, we take care of people. This extends to how we treat our employees, customers, our suppliers and our shareholders.

Second, just has always been the case at ExOne, to honor and obey the law. I say this to ensure that the right tone from the top is set and to drive strong levels of ethical behavior, accountability and transparency.

And third, work to create value every day for the shareholders, for the customers and within our businesses. Simply put, I expect all three to be occurring every day, everywhere and if they are not happening, it's a call to action by our team.

The second insight is how we view decision-making and here again simplicity is key. Every time we review a part of the business, we ask two questions. Number one, is the activity or business function acting to advance the adoption of binder jetting technology in the marketplace and number two, is the activity creating positive cash flow.

If the answer to these questions is yes and yes, then we keep it, improve it and support it. If the answer is no to one or the other, we talk about it and decide the best course of action. If the answer is no and no, we don't do it. It is with this set of concepts that we have worked through the business over the last seven months and it is what has resulted in the directional changes we are implementing at ExOne.

Now let's get started discussing the direction of ExOne with slide 5. Here we captured in one place how we strategically view the business and the corners are the foundational items that say where we drive the business; in the center is the how we drive the business; and mixed in between are the what we will make in our business or said differently our productlines.

The productlines of indirect machine, direct machine, product application and aftermarket are defined this way to align them with how our customers experience our services and the differing needs they have.

Starting in the upper left, we summarize our vision to be the market leader and supplier of choice for industrial 3-D binder jet printing technology. The how we do this is by setting the standard in 3-D printing equipment, expanding our machine capabilities and optimizing the costs to use our product. We are already the market leader in sand binder jet printing, holding about 80% marketshare. Our machines are setting the standard for industrial 3-D printing led by our S-Max.

We are currently providing the broadest material offerings to the market, including our most recent addition of cold hardening phenolic and sodium silicate, which we believe are expanding the application of our equipment in the marketplace.

And while our current line of direct printing machines is newer to the market, our M-Flex and Innovent are viewed in the industry as having the strongest potential for creating the fastest, most cost-effective and highest volumetric size 3-D printed parts, particularly in the area of non-weldable materials and fine metal powders.

Referring to the lower right, we believe our total addressable market opportunity in all our productlines grows each time we expand our machine capabilities and material selections. The how we do this is by accelerating the adoption of our core technology and to provide you more detail on how we believe we can achieve this, please turn to slide 6.

Now this slide is intended to show you how we at ExOne view the stages of binder jet technology adoption. To explain how it works, think of this as a model that reflects the way a disruptive technology is adopted and used. In our mind, ExOne's technology is certainly disruptive and fits this example.

The first phase is value-seeking. When a customer is in this phase, there are steps they make along the way. We have broken the steps down, but it is important to note that each step does not happen in exactly this order. Rather they represent a general progression from becoming aware of the disruptive technology, accepting it is realistic to use and finally, identifying how they will apply the technology to their needs.

Naturally, this is the first phase that customers need to achieve before they will become a real prospect. Fortunately, we believe that, in many cases, recent public statements and acquisitions made by notable large industrial companies have served to advance many potential customers past aware and accept and put them into the apply region and consequently, actively seeking how binder jet technology could be used.

The next phase is one of value discovery and it consists of trust, experience and afford, which are really best thought of as validating steps a customer will take before committing to use the technology. In these stages, customers begin to test our technology and gain experience and trust in how it can be used to make their products. It is here that our ExOne adoption center and production service centers come into play to advance adoption.

The last phase is one of value-creation consisting of adopt, advance and exploit, which I believe are self-explanatory, but certainly represent a stage in which the greatest value will be created for ExOne and its customers. Getting customers to this phase and working with them here to continually improve our products is our ultimate objective.

We have incorporated this adoption stage approach to our interactions with our customers and use it as a guide to identify the present phase or stage of a customer and assist them in accelerating their adoption and our revenue growth.

Now please turn to slide 7 and let's discuss how this adoption process is connected to our technological development. This is a technology timeline that shows the past six years and the different points in which either machine capability or material selection has been introduced.

Of note, as you look at this slide, is the changes in slope for growth that have occurred after certain technology insertions. Although one-for-one relationships can't be made, we believe this graph does show a connection between the development of key technologies and overall ExOne growth.

Now let's turn to slide 8. This slide is a look at our sand printing market broken down by geography and machine platform. First off, the geography-based graph shows that much of our historic installed base is located in Asia and Europe and true to this fact, we have found these markets to have customers with much higher levels of adoption of binder jet printing.

Likewise, the Americas market has historically been less advanced than the adoption process and consequently, its share of machine totals is lower. However, based on increased adoption stages in the Americas, coupled with expanded ExOne product offerings, we expect to experience growth in this region going forward.

Turning to the machine platform graph, you can see that more than half of -- half of this is represented by our workhorse S-Max platform. And this platform is where many of our technical advances have occurred. This serves to reinforce the value of driving capability and material options into our equipment base as a means of growing both binder jet technology adoption and expanding the addressable market associated with it.

Now let's which gears and move away from one market and talk about the entire range of ExOne productlines. Please turn to slide 9 to discuss how we are reviewing productlines.

As I discussed earlier, we recognize that different customers have different needs depending on where they are in the adoption cycle. These varying needs also correlate to what types of products and services we should be offering them. Accordingly, we view our products in four general categories of indirect and direct machine with both productlines focused on expanding machine capability and material types for their respective markets, product applications, which covers the assortment of both new product development and retail printing services provided primarily by our ExMAL and North Huntingdon PSC and finally, an aftermarket product that includes things like direct and indirect machine consumables, customer training and education and spare parts and servicing other equipment.

Now before I turn this over to Brian, please turn to slide 10 and let me conclude with a quick summary of some of the directional changes we began and announced in Q1 and will continue to implement throughout the balance of 2017.

First, driving adoption rate improvement across the markets we service, as well as into new markets is a key message that we are embracing as a Company. Second, we will continue to review all operations and evaluate how they expand, adopt and generate positive cash flow.

As we announced in January, we are migrating some of our production service centers into ExOne adoption centers or EACs. This concept broadens our offerings to be more responsive to our customers' needs at the point of service.

Under the EAC concept, we will sell printed services that promote adoption as opposed to just selling volume production. We will upgrade selected facilities to include our latest technology and equipment and invest in our people there. These are in process and will be ongoing for the rest of the year.

Third, to lead our commercial efforts, we have strengthened our team and added tools and processes to aid with prioritization and accountability. We have good visibility into our pipeline now and believe this will assist us in forecasting and managing our business.

Fourth, we will maintain a laser focus on investing in the right core technology that expands our equipment capability, human capital or infrastructure needed to support our growing install base of equipment and expanding addressable market.

Now, with that, I'll turn it over to Brian for a review of our financial results.

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Brian Smith, ExOne Company - CFO & Treasurer [4]

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Thanks, Jim. Good morning, everyone. If you could please turn to slide 12. We'll start with our revenue results. We finished the year at $48.7 million, up 18% over 2015; non-machine at 56% and machine at 44%. We continue to emphasize that our revenue can be a bit lumpy due to the individual size of our indirect machine orders and 4Q 2016 shows some of that lumpiness as some customer projects pushed out into 2017.

To help you understand the machine activity impacting us, please turn to slide 13. You'll see our shipments and revenue recorded in units by machine type for each quarter and the full year of 2016. Nine machine units were shipped in the fourth quarter, 12 were recorded in revenue, both weighted heavily towards our S-Max platform.

As I said last quarter, we continue to improve on our ability to ship and record revenue on our machines in a shorter timeframe. Having said that, there's still some variability in certain instances that will result in lags in between shipment and revenue for any number of reasons; for instance, contract terms or performance obligations or overseas shipments just to name a few.

For the year, 18 of the 33 machines recognized as revenue were from our larger indirect printing platforms. In terms of customers, roughly one-third of the machines recorded in revenue in the quarter and just under 30% for the year were to repeat machine customers. This demonstrates the stickiness of the technology with customers as they begin to use the technology in broader applications or locations within their business.

Leasing is still an option for our customers to begin to engage in the technology; albeit new leases have slowed in the last two quarters. Having said that, we have entered into contracts to deliver machines on leases in 2017 as this is still a good alternative for our customers to adopt our technology.

Now if we could turn to slide 14, we finished the year at $19.7 million of backlog, up from the December 2015 backlog of $16.5 million and virtually flat on the last couple of trailing quarters. To remind you, backlog includes firm orders received from our machine and non-machine customers not yet shipped or goods in transit, as well as machines, which have been shipped to our customer sites that are in some stage of installation, commissioning and acceptance. Backlog also includes firm orders for contractual services like our missile defense agency contract and operating leases that are non-cancelable.

The largest portion of backlog is our machines and represent customers in a variety of industries, including automotive, foundry, heavy equipment, tooling, aviation and the pump industry for water and other fluids.

The 2016 year-end backlog shown here includes the four Exerial machines shipped in May of 2015 and we are fully paid for those machines. I will refer you to our discussion in note 15 to our financial statements in our Form 10-K for further information.

On slide 15, you can see our machine sales are up 36% to $21 million. As I mentioned earlier, this year included revenue on 33 machines compared with 26 last year. You can also see that our fourth-quarter sales are down 21% to $7.5 million. This is against a strong 2015 fourth quarter where we recorded over 60% of our machine revenue during that quarter for the year. The 2016 and 2015 fourth quarters each reflect 12 machines sold with a mix toward the higher price indirect machines in our 2015 quarter over 2016.

Turning to slide 16, non-machine revenue, you can see it is up 8% to $26.8 million for 2016 and also up 7% to $7.1 million in the fourth quarter of 2016. While not shown here, the fourth quarter of 2016 non-machine revenue was up 9% over the trailing third quarter demonstrating the steady increase in adoption of our binder jetting technology.

We have said that non-machine revenues is not as lumpy, although it does have some unevenness to it and we're pleased to see steady increases in this area as our install base of machines grows.

Turning to slide 17, we talk about gross profit and margin. We have previously said we need volume to grow our margin percentage to offset our fixed costs. And as you can see, the higher gross margin percentage with higher sales volume was realized during the 2016 year. For the quarter, our 2016 margin percentage was slightly lower than the strong margin percentage driven by sales in 2015.

Also worth noting is that the 2015 year results included inefficiencies associated with the transition to our new and expanded facilities in Gersthofen, Germany and here at North Huntingdon, as well as the deployment of our ERP system in Germany. Now that those are behind us, we have improved efficiencies in those operations reflected in 2016.

Let's turn to slide 18 to talk about SG&A. Comparing 2016 to 2015, you can see the results of our cost discipline that we began last year. Our fourth-quarter and first-quarter costs are typically higher than the other quarters within the year due to the activities around year-end. Last year's fourth quarter benefited from net bad debt recoveries that we called out last year and as one would expect, that situation did not recur this year.

On slide 19, R&D continues to be largely a fixed cost for us, which is our people cost. As we have said, businesses remained fairly flat on a sequential basis for a number of quarters. The 2016 fourth quarter is comparable to 2015. The sequential quarter increase is primarily due to materials used in machine development, as well as materials used in development of our new binder sets in our indirect printing machines.

As we move into the first half of 2017, I want to give you a heads up that we will incur restructuring charges and other costs associated with our exit from our Machin-A-Mation specialty machining operation in Michigan. The same holds true for the restructuring of our US PSCs into EACs and the related combining of our Las Vegas PSC into our Troy and Houston locations.

We are currently on pace to have these activities completed in the second quarter, including liquidation of the assets. Our restructuring charges are currently estimated between $1.1 million and $1.6 million, of which $1 million to $1.3 million will be non-cash for these activities and with the remainder consisting of employee termination costs and other exit costs.

We also expect to have some other inefficiencies and business transition-related expenses in Q1 and Q2 as we move toward our new model and make changes within the organization. These items, as well as the fact that our first quarter is typically one of our lower volume quarters, will weigh heavily on our first-quarter gross margin and overall profitability.

Now let's turn to slide 20 to talk about CapEx. As you can see, and consistent with what we've been saying all year, our 2016 spending has been very modest, less than half of 2015. Our cash portion of CapEx was $1.3 million versus $4.9 million in 2015. The non-cash portion, just to remind you, pertains to transfers of machines from inventory into [BP&E] for our own use or for customer leases.

With most of our CapEx needs behind us for the foreseeable future, 2017 cash CapEx will remain low at between $1 million to $2 million. Additionally, during 2017, we expect about $2.5 million to $3.5 million of net cash proceeds from the sale of property and equipment in connection with the restructuring activities I mentioned above.

If we turn to slide 21, you will see a waterfall of our 2016 cash flows. As a reminder, the $13 million from capital transactions was related to our first-quarter raise and we have not had any capital transactions since the first quarter.

We had cash CapEx, as I said before, of about $1.3 million. Our initiative we discussed with you during the year around working capital management provided us with about $4.8 million of cash mainly due to improved AR collections, higher customer deposits, as well as reductions in inventory.

Our net loss net of non-cash items and other used about $8 million. We ended the year with $27.8 million in cash, which we believe is sufficient to support our current operating plan.

If you'll turn to slide 22, you'll see the $27.8 million in cash and you also see that we still have virtually no debt on our balance sheet. With that, I will turn it back to Jim.

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Jim McCarley, ExOne Company - CEO [5]

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Okay, let's move now to slide 24. I'd like to spend a few minutes talking about where we are headed. As I mentioned in the beginning of this presentation, our customers in markets are at varying phases of adopting our technology. Therefore, we have created some structures to help us guide them through the adoption cycle.

I will start with our indirect technology, which is our most mature product. As noted here, we believe that several of our markets, namely automotive, heavy equipment and oil and gas general industry, are well beyond the value-seeking phase and are in fact on the cusp of moving into the value-creation stage. It is this level of adoption that gives us confidence that we can achieve growth in 2017. Additionally, although not as advanced as the prior markets, we see other markets listed as good opportunities for growth.

Now please turn to slide 25 where we will take a similar look at the adoption of our direct printing technologies. As shown here, our direct printing technology is not at the same level of adoption as our indirect business. This is also consistent with our outlook for growth in these markets we serve today.

However, the entire market for direct printing non-weldable and fine powder materials is still in the early phases of adoption and as such, its lower adoption rate is explainable.

The positive thing this chart tells us is that ExOne is much more advanced than the adoption of our technology in the universities and academia, as well as industrial R&D departments and governmental laboratories. Since these are the incubators of innovation for direct printed products, we believe this level of adoption bodes well for ExOne and will continue to be an area in which we can expand our marketshare.

Finally, there are other applications like oil and gas, metal injection molding and general tooling that we believe can be advanced in the near term with focused material development and core machine technology improvements into our existing machine base.

It is also clear to us that a continued focus on increasing customer adoption rates across the entire direct printed marketplace is how we can expand ExOne's direct printer addressable market.

To underwrite this focused effort, please turn to slide 26 where I will get a bit more specific on our commercial initiatives to expand adoption. Now this list is really blocking and tackling type items, but here's a quick look at what we are doing.

We hold formal regularly scheduled pipeline and process reviews to keep our team on the same page and identify priorities. This also assists in our forecasting and general management. We've instituted a focused coordination of our technical development roadmap with our near-term and long-term customer needs.

And finally, we have established a key account structure to ensure we maintain good alignment with our markets and what it takes to advance the adoption of our technology.

Now let's turn to slide 27 where I will summarize our current outlook and vision. Our outlook remains positive, but pragmatic. We aren't providing definitive guidance for 2017, but I will be providing some directional guidance for you.

Although we will continue to have fluctuations in quarter-to-quarter revenue and profitability comparisons between consecutive quarters and year-over-year, we expect at least 25% growth in annual sales in 2017 compared to 2016. Although we also expect to achieve operating leverage, stable cash flow and positive adjusted EBITDA by year-end, as mentioned by Brian earlier, we will experience significant profitability headwinds in the first half of the year.

Looking beyond 2017, we believe that continuing our investment in equipment capability and material qualification, coupled with applying our enhanced commercial management and tools, we can achieve sustained year-over-year revenue growth rates that exceed 25%.

So with that, let's open up the lines for questions and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Christopher Van Horn, FBR.

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Dan Drawbaugh, FBR Capital Markets - Analyst [2]

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Good morning. This is Dan Drawbaugh on the line for Chris. Thanks for taking my questions. So I wanted to start, if I could, I wanted to start on the Exerial machine. I was wondering if you could give us a sense of where you are with the contract. I believe you said it was supposed to play out in 2017 and I was kind of wondering if you could update the scope of demand you are seeing, how are conversations going with other potential customers there.

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Jim McCarley, ExOne Company - CEO [3]

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Yes, sure. You know what? Let me just talk about the Exerial generally for you and lay that out for you. We are very confident in that platform and how we see it performing. As you will recall, we've got an Exerial inside of our organization where we've done product development and so we've got a much stronger understanding of what that machine is able to do and how it can perform.

Additionally, we've got some equipment that's going to be rolling out, is already in the final stages of installation at one customer and we have a second customer that the equipment is rolling onto their site late this month and will be coming up to speed. So we are going to have some more data points in actual application to evaluate that equipment. So overall we are very positive.

Let me tell you about what we're seeing on demand. We actually are getting a lot of interest from a lot of different places primarily because of the volumetric size of this machine and also the production rates. But I'll also tell you that we are working with the customers to make sure that we match this equipment. This isn't a piece of equipment that's going to necessarily serve everybody. We think that there may be a need to possibly make some enhancements to our S-Max platform and get some speeds up with it and that might in fact mitigate a little bit of the Exerial interest, but overall I would say we've got several interested parties and at least three or four machines that are in discussions with customers.

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Dan Drawbaugh, FBR Capital Markets - Analyst [4]

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Great, thank you for the color. Then moving on I guess a bit more of a numbers question. When you are thinking about your at least 25% sales growth guidance, how are you looking at the materials PSC services line versus the machines line? In the past, your machines grew quite a bit faster. Is that something we expect? Is there any color you can give around the machines revenue growth number?

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Brian Smith, ExOne Company - CFO & Treasurer [5]

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Yes, that 25% is going to be largely driven by machine growth. I think the non-machine side will continue a steady path as it has because it just doesn't have those huge bounces that the machines do, but principally that growth is machine revenue growth.

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Dan Drawbaugh, FBR Capital Markets - Analyst [6]

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Okay, got it, thanks. And then on the ExOne adoption centers, I was wondering if you could just give us some background on how that decision came about and how that plays into your guidance for the coming year and beyond. What does this contribute to that 25% sales growth number?

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Jim McCarley, ExOne Company - CEO [7]

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Really the adoption center sort of underwrites the sale of equipment when it's all said and done. I think the shift is when I went and looked at what we were doing across our business, it was clear to me that we didn't have some of our latest and greatest technology inside of some of those areas. And I think that represented a meaningful gap.

Some of the new capabilities that we are initiating inside of our equipment, we need the ability for a customer to experience that and so that's really how we looked at the adoption centers.

Now, with time, as the install base goes up in different regions, we think there's opportunities to expand our training that we do and sort of more advanced type of training work with people. Certainly localizing some of our service support by adding some people into those adoption centers that can support equipment in the field, as well as process development. We really believe process development of a material and a binder combination sort of blended to match what the customer requirement may be yet another way that we would initiate interest in the machines. So it's not just one single approach; it's really across the board.

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Dan Drawbaugh, FBR Capital Markets - Analyst [8]

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Great, thank you guys for all the color. I'll go ahead and jump back in queue.

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Operator [9]

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(Operator Instructions). Saliq Khan, Imperial Capital.

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Saliq Khan, Imperial Capital - Analyst [10]

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Good morning, Brian. Good morning, Jim. Just a few questions on my end. The first one being you've talked about this right now, Jim, but if you look at the amount of Exerials and the S-1 Max that were shipped last year versus this year, I understand that you are actually working with -- the sales teams are working with the customers, it's a much longer sales cycle. But if you take a larger look at the customer base or potential customer base, what are some of the biggest headwinds that you are facing right now when it comes to both Exerial, but also the S-1 Max, both of which by the way are different price points?

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Jim McCarley, ExOne Company - CEO [11]

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Yes, the headwinds between -- I would say -- let me back up and come at it this way. The headwinds are really I don't think the right way to characterize what I think dictates how those machines are adopted. It really comes down to the material combinations that we've put in place and meeting capability needs of customers.

My view is that our biggest obstacle to growth is only driving usable capability into that equipment as quickly as possible and in some cases, for this to happen, we're going to have to do a little bit of customization to the machines. One size fits all probably at some point has a diminishing value in the marketplace. There's slight customization, something needs to be slightly different with one machine versus another. Those types of things I wouldn't call them headwinds; I would call them new variety or new things that we have to consider as we start to see this technology move into the market as something that matches better with specific customer needs. That's how I would view it, Saliq.

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Saliq Khan, Imperial Capital - Analyst [12]

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Got it. As you think about your time at RTI and all the operating work that you had done there, if you translate that over to ExOne, what are some of the processes that you can improve from both a sales strategy, but also from an adoption rate to increase the amount of machines that are sold and to hopefully bring about more visibility if not quarter by quarter on machine sales, and maybe more visibility when we look at it from an every six month perspective.

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Jim McCarley, ExOne Company - CEO [13]

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Yes, so I'd point you to two things. First off, one of the things I had really great leadership or a good example to look at was how we worked with the customer at the CEO level. We really did emphasize at RTI what does the customer want, how do we bring value to them and really carry that customer focus. In some cases, that wasn't saying yes to things that we couldn't do; it was saying yes, but finding out how to blend it with what the organization could actually accomplish. So there's a little bit of that.

I think a much stronger customer orientation is always a good thing. You can never have strong enough connections to what the marketplace wants. So I think that's less operational and more around the commercial side, but that's a very important element here.

The other thing that I think we can do to drive adoption is we are starting now to put not just a customer or a market, but even regions into where are these places in the adoption cycle, what do they need to see in order to become more confident and take the step to bring on the technology and really focused wise, customer by customer, application by application really understand that so we can go fill in those bubbles.

If we go to those charts that I was showing you, in my view, if we could make that chart green through all of the first six stages across every one of those markets, we'd have an unbelievable growth pattern that would come as a result of that.

My experience at RTI was bring a methodology into the organization, stay true to it and then do some disciplined work around always bringing it back in front of the team.

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Saliq Khan, Imperial Capital - Analyst [14]

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Great. One last question on my end. If I take a look at the balance sheet, if I start thinking about the $28 million of cash that you guys have sitting, which is up from last year, what are some of the best use cases for that cash for you?

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Jim McCarley, ExOne Company - CEO [15]

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Best use cases?

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Saliq Khan, Imperial Capital - Analyst [16]

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Right, so is there essentially technologies that are out there that you are thinking that could be able to better augment what you have right now or are there better ways to incentivize or compensate (inaudible) salespeople either within the organization or externally to bring them over or to be able to put that money to better use to increase the amount of -- I shouldn't say the types of machines, but essentially the materials that are being utilized within the machines. Anyone of those things (multiple speakers).

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Jim McCarley, ExOne Company - CEO [17]

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Yes, so I'll be real straightforward here. One of the things that I want to make sure is clear is that we've got to invest in this machine core capability and material types and when I say invest, I mean we are going to have to in some cases apply real cash towards that type of work, as well as we are seeing that things that surround our equipment, items like how you depowder our boxes, things that support the productivity of that machine have importance to the customer. I can see us having to invest in bringing some of those types of productlines on board.

If we find some special areas where we can really enhance our overall core capability with acquisition, that's something that I certainly think would make sense. But to answer your question as straightforwardly as possible, every dollar that we can invest into expanding that machine capability or our material selection that's just doing nothing but I think doubling, tripling or quadrupling our dollars over the long haul.

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Saliq Khan, Imperial Capital - Analyst [18]

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That's great color, Jim. Really appreciate it, guys.

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Operator [19]

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Bobby Burleson, Canaccord Genuity.

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Jon DeCourcey, Canaccord Genuity - Analyst [20]

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This is actually Jon DeCourcey on for Bobby. I had my other questions answered, so just wanted to see if you guys could provide a little bit more color on the scale of revenues that were pushed out on customer orders that were pushed into 2017. Just a little more color on that and when you think the orders will be recognized, whether it's first half or second half. Just kind of total scope.

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Brian Smith, ExOne Company - CFO & Treasurer [21]

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Yes, again, I'd point you to our footnotes that I mentioned before about that's certainly a piece of it. And there's probably one to two machines more than that that will get recognized. Certainly those one to two machines further than that will get recognized in Q1, Q2 type timing. So I think we were believing we were pretty close to what people were expecting, so it's in that neighborhood.

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Jon DeCourcey, Canaccord Genuity - Analyst [22]

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Okay, great. Thank you.

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Operator [23]

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At this time, I would like to turn the floor back over to management for any additional or closing comments.

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Jim McCarley, ExOne Company - CEO [24]

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Okay, well, thank you, everyone. I appreciate your time today. We are having a lot of fun here at ExOne and I'm proud to be part of the team here and we look forward to moving into 2017. So thanks again.

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Operator [25]

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Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day.