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ExOne Delays Q1 Results due to ERP Implementation Issues

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Leading 3D printing machines, printed products and services provider firm, The ExOne Company (XONE - Free Report) announced that it has filed Form 12b-25 with the Securities and Exchange Commission due to its delay in filing quarterly report in Form 10-Q. The company is expected to file Form 10-Q for quarter ended on Mar 31, 2015 in early Jun 2015.

Why the Delay?

ExOne had completed implementation of the first phase of an advanced software system called Enterprise Resource Planning (“ERP”) at its largest operating subsidiary, ExOne GmbH, in Jan 2015. The strategic action was aimed at rendering the company's financial reporting disclosure controls flawless.  Considering ExOne had faced material weaknesses in internal controls over financial reporting, especially in areas of design and operating effectiveness, this strategic action comes across as a prudent move (read more: 3D Printing Firm ExOne Faces Financial Reporting Trouble).

Though the ERP system was designed to strengthen financial reporting, certain “unforeseen difficulties” in the system led to accounting issues in the quarterly results. These difficulties particularly delayed the filing of Form 10-Q that earlier had a due date of May 11, 2015.

Assurance from Management

However, notwithstanding these difficulties, management remains confident that its amendment efforts will soon bear fruits, thereby allowing the company to report accurate results by Jun 2015. ExOne, recognizing the importance of comprehensive and correct closing process, is leaving no stone unturned in rectifying the problem.

Guidance Reaffirmed

ExOne believes its binder jetting technology remains one of its biggest strengths, holding tremendous potential both in the long and short terms. Based on the strength of this technology and subsequent opportunities, the company has reaffirmed its 2015 guidance that was previously announced on Mar 16, 2015.

According to the guidance, revenues are expected to improve 32–50% to $58–$66 million. Additionally, gross margin is expected in the range of 36–40%, excluding anticipated non-recurring costs. Without the ERP implementation costs (currently in the range of $0.5–$1.0 million), SG&A expenses will likely come within $21–$23 million. Finally, R&D expenses and capital costs are anticipated in the respective bands of $6.5–$7.5 million and $5–$7 million.

Our Take

We believe ExOne’s reaffirmation of guidance, despite ongoing problems in implementation of the ERP system, is quite encouraging as it will boost investors’ confidence in the stock. Also, the company’s target to solve the problem by early June reflects management’s relentless efforts toward overcoming the limitation.

Zacks Rank   

ExOne presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the technology sector include Cirrus Logic Inc. (CRUS - Free Report) , CEVA Inc. (CEVA - Free Report) and Silicon Motion Technology Corp. (SIMO - Free Report) , both sporting a Zack Rank #1 (Strong Buy).