VALENCIA, Calif., Aug. 1, 2005 - 3D Systems Corporation (Nasdaq: TDSC), a leading provider of rapid 3-D printing, prototyping and manufacturing solutions, announced today that revenue increased 17% in the second quarter of 2005 and 10% in the first six months of 2005 compared to the corresponding 2004 periods.

Revenue from systems increased 35% in the second quarter and 11% in the first six months of 2005 compared with the prior-year periods reflecting continuing strong unit growth from new systems, including InVision™ 3-D Printers, introduced since the latter part of 2003. In a quarterly reversal of the trend of declining sales of mature systems, unit volume from the sale of those systems increased.

Revenue from materials increased by 22% in the second quarter and 19% in the first six months compared to the respective 2004 periods, primarily reflecting strong unit growth in the sale of new materials.

Revenue from services declined modestly in the second quarter, primarily due to lower revenue from customer training and a decision to cease providing system enhancements for certain older legacy systems, but increased modestly in the first six months of 2005 compared to the 2004 periods reflecting relatively stronger performance in the first quarter of 2005.

Revenue increased at double-digit rates in each geographic area in which the company conducts business in the second quarter of 2005 compared to the 2004 quarter and increased at double-digit rates in the U.S. and the Asia-Pacific region in the first six months of 2005 compared to the 2004 period. Without the favorable effect of foreign currency translation, revenue would have increased 16% for the second quarter and 8% for the first half of 2005.

      With this higher level of revenue, for the second quarter of 2005:

• the company reported $1.7 million of operating income due to its higher revenue and higher gross profit, sharply higher than its $0.1 million of operating income in the second quarter of 2004; and
  
  
• the company reported $0.9 million of net income available to common stockholders, a $2.1 million improvement over its $1.2 million loss in the 2004 period.

and for the first six months of 2005:

• the company reported $3.4 million of operating income compared to a $1.1 million operating loss in the first six months of 2004; and
  
  
• the company reported $1.6 million of net income available to common stockholders, a $5.4 million improvement over its $3.8 million loss in the 2004 period.

“The strong revenue growth in the second quarter of 2005 continues to reflect the positive underlying trends and successful early results from the fundamental changes in the company’s business model that we implemented during 2004,” said Abe Reichental, 3D Systems’ president and chief executive officer.

“Our efforts to accelerate product mix changes from aging, large-frame systems and materials to new 3-D printing and rapid manufacturing solutions, our initiatives to increase recurring revenue from materials and composites, the 2004 restructuring of the U.S. sales organization and our decision to discontinue quarter-end discounts all contributed to the higher level of revenue in the second quarter,” continued Reichental.

“Sales of new products and services, which include the increasing revenue contributions of InVision™ 3-D printers, grew to 22% of total revenue in the quarter and 21% of total revenue in the first six months of the year. During the last few weeks of the second quarter, we began shipping our new integrated manufacturing-capable Sinterstation® Pro SLS® (selective laser sintering) systems. Revenue generated from this new and exciting product line was not material to the second-quarter results,” continued Reichental.

“In a quarterly reversal of the trend of declining sales of the company’s mature equipment models, revenue from these mature systems increased by $1.2 million compared to the second quarter of 2004. During the second quarter, we also recovered approximately half of the revenue that we believe we gave up in the first quarter when we turned down deeply discounted customer orders late in the quarter, after certain of the customers involved resubmitted orders on terms more favorable to us,” concluded Reichental.

Gross profit increased in both the second quarter and the first six months of 2005 compared to the corresponding 2004 periods. Gross profit increased to $14.3 million for the 2005 quarter from $12.3 million in the 2004 quarter and to $27.4 million in the first six months of 2005 from $24.3 million in the first half of 2004. Gross profit margin declined by 0.3 percentage points in the second quarter compared to the second quarter of 2004 but increased by 0.9 percentage points in the first six months of 2005 compared to the 2004 period.

Cost of sales continued to benefit from our outsourcing activities during the second quarter and first six months of 2005, and during the second quarter of 2005 it benefited from the favorable effect of foreign currency transaction items. For the second quarter of 2005, foreign currency transaction items had a $0.2 million favorable effect on cost of sales compared with the 2004 quarter. For the six-month period, foreign currency transaction items had a $0.8 million unfavorable effect on cost of goods compared with the first six months of 2004.

For the second quarter of 2005, product cost of sales was adversely affected by certain performance enhancements activities associated with our InVision™ 3-D Printers, and service cost of sales increased as a result of increased spending for our U.S. and Asia-Pacific training and field-service operations.

Total operating expenses increased by $0.5 million in the second quarter of 2005 but decreased $1.4 million in the six-month period compared to the corresponding 2004 periods. Total operating costs declined to 38% of revenue in the second quarter and first six months of 2005 compared to 44% of revenue in the second quarter and the first half of 2004.

Selling, general and administrative expenses increased $0.4 million in the second quarter primarily due to the absence in the 2005 period of last year’s $0.4 million reduction in an accrual for healthcare costs and a variety of other costs, partially offset by $1.0 million of lower legal costs and by lower provisions for bad debts. For the six-month period, SG&A expenses declined by $1.5 million due to $2.7 million of lower legal costs and the other factors affecting the second quarter discussed above.

Strategic and tactical R&D expenditures increased to $2.7 million in the second quarter of 2005 from $2.6 million in 2004, and increased modestly for the first six months of 2005. The Company continues to expect R&D expenditures to be in the range of 7-8% of total revenue for the full year 2005.

“We continue to be extremely pleased with the significant and continuing improvement in the company’s profitability,” said Reichental. “With the strong top-line growth in the second quarter from new products as well as the contributions to higher revenue in the quarter made by core products and systems, we believe that we are benefiting increasingly from our strategic initiatives.

“We are continuing to focus on broadening our product portfolio consistent with our key initiatives to grow the company’s rapid manufacturing and 3-D printing base. We recognize the importance of developing specific solutions to improve our customer’s bottom line through an unwavering commitment to R&D which in turn fuels our top-line growth,” continued Reichental.

“During the second quarter, we announced the introduction of the company’s Sinterstation® Pro SLS® systems, an advanced new line of automated selective laser sintering manufacturing systems. These systems have been well received by customers, and we began to ship them late in the second quarter.

“We also announced during the second quarter the availability of three new laser sintering materials that are designed for rapid manufacturing applications: DuraForm® Flex Plastic, a new rubber-like, tear-resistant, flexible plastic; DuraForm® AF Plastic, a new cast-aluminum-like engineered composite for use in the company’s selective laser sintering systems; and DuraForm® FR plastic, a new flame-retardant material, for exclusive use in Sinterstation® Pro SLS® systems.

“We also announced plans to introduce later this year the InVision™ LD 3-D Printer, the first ever affordable desk-top 3-D printer. We expect the addition of this printer to nicely complement our growing family of InVision™ 3-D Printers.

“We very much appreciate the confidence expressed in us by Align Technology, one of our long-term customers, which recently placed orders for several million dollars worth of SLA® 7000 systems for delivery through the end of 2006. Align’s recent orders along with positive trends in the hearing aid industry and dental molding sector reinforce our commitment to accelerating the development of additional rapid manufacturing opportunities.

“We were pleased with the continuing improvement in the company’s balance-sheet management during the first six months of 2005. Net working capital rose by $9.8 million to $38.1 million while the company reduced net trade receivables by $2.9 million, maintained inventory in the range of $9.3 million, and increased its cash balance by $1.8 million,” concluded Reichental.
3D Systems will discuss its operating results for the second quarter and first half of 2005 on a conference call and audio web cast to be held at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today. Details are set forth below.

        Second-quarter business highlights:
      During the second quarter, 3D Systems:

• Announced the availability of Sinterstation® Pro SLS® systems, Models 140 and 230, which are automated selective laser sintering (SLS®) manufacturing systems designed to enable the company’s customers to mass customize and produce high-quality end-use parts, patterns, fixtures and tools consistently and economically from the company’s proprietary engineered plastics, on-site and on-demand.
  
  
• Introduced DuraForm® FR plastic, a new flame-retardant material, for exclusive use in Sinterstation® Pro SLS® systems.
  
  
• Introduced DuraForm® Flex plastic, a rubber-like, tear-resistant, flexible plastic that can be used in the company’s selective laser sintering systems to produce functional prototypes and end-use parts for which rubber-like, flexible characteristics are useful.
  
  
• Introduced DuraForm® AF plastic, a cast-aluminum-like engineered composite for use in the company’s selective laser sintering systems that has the appearance of aluminum.
  
  
• Introduced the InVision™ LD 3-D Printer, the third 3-D printer to be added to the company’s 3-D printer product line. The InVision LD 3-D printer uses a layered deposition technology that builds complex geometrical shapes one slice thickness at a time, and is designed for communication and concept modeling applications.
  
  
• Introduced the VisiJet® SR 200 plastic for the InVision™ SR 3-D printer. This material mimics the general performance characteristics of high-volume thermoplastics such as polypropylene and ABS.
  
  
• Announced the availability of the ProCure™ system, a stainless steel part-curing system for parts produced on certain of the company’s SLA® systems.
  
  
  3D Systems’ complete suite of customer solutions includes
  
  
• 3-D Printing systems, which accept digital input from a three-dimensional CAD station, convert the digital file one horizontal slice at a time. The standard (SR) and high resolution (HR) printers use jet hot-melted plastic material in an additive layer-by-layer build-up to create a solid part. The LD unit uses layered deposition (LD) technology to build complex geometrical shapes one slice thickness at a time. 3-D Printers enable designers, engineers, architects and marketers to communicate their concepts frequently, and to substantially reduce the time it takes to bring new products to market.
  
  
• Stereolithography or SLA® systems convert proprietary materials and composites into solid cross-sections, layer by layer, until the desired parts are built. SLA® systems are capable of making multiple parts of different geometries and shapes at the same time and are designed to produce prototypes, patterns or end-use parts that have a wide range of sizes and shapes.
  
  
• Selective Laser Sintering or SLS® systems use heat to melt and fuse, or sinter, powdered materials into solid cross-sections, layer by layer, until the desired parts are complete. SLS® systems can create parts from a variety of plastic and metal materials and composites and are capable of processing multiple parts within the same build cycle.
  
  
• Engineered materials and composites that the company blends and markets under a variety of brand names for use in all of the company’s systems to produce high-quality models, prototypes and parts. Stereolithography materials are marketed under the Accura® brand, selective laser sintering materials under the DuraForm®, LaserForm? and CastForm? brands, and 3-D printing materials under the VisiJet® brand. The company also distributes additional materials and composites that are manufactured by DSM Somos® and Dreve in order to enhance the portfolio of solutions available from the company.
  
  
• Software for proprietary part preparation for use on personal computers and engineering workstations. These proprietary software packages generate the information required by the company’s SLS®, SLA® and 3-D printing systems to create three-dimensional models and parts.
  
  
• Services that the company provides include a suite of comprehensive customer services and local field support that are provided on a worldwide basis for all of the company’s systems. Such services and support include extended system warranties, an extensive menu of annual service agreement options, and a wide variety of software and hardware upgrades and performance enhancement packages for legacy systems.
  
  
  Broad Applications and End-Uses:
  
  
• 3-D Printing system solutions are used for concept-modeling and three-dimensional printing applications. 3-D printed parts are used primarily for visualizing and communicating mechanical design applications. They are also used for other applications including supply-chain management, architecture, art, surgical modeling, marketing and entertainment.
  
  
• Rapid prototyping system solutions are used for rapid prototyping applications, including the generation of product concept models, functional prototypes and master-casting and tooling patterns that are often used as an efficient, cost-effective means of evaluating product designs.
  
  
• Rapid manufacturing system solutions are used for rapid manufacturing applications to manufacture end-use parts, jigs, fixtures, tools and patterns directly from a digital image. The company’s rapid manufacturing customers produce end-use parts without the need for expensive tooling or molds and without lengthy set-ups, resulting in significant savings, flexibility and mass customization capabilities.
  

Conference Call and Audio Web Cast Details

3D Systems will hold a conference call and audio web cast to discuss its second-quarter and first half 2005 financial results today at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time).

• To access the Conference Call, dial 877-791-4796 (or 706-679-6014 from outside the United States). A recording will be available two hours after completion of the call for seven days. To access the recording, dial 800-642-1687 (or 706-645-9291 from outside the United States) and enter 7677566, the conference call ID number.
  
  
• To access the audio web cast, log onto 3D Systems’ website at www.3dsystems.com. The link to the web cast is provided on the home page of the website. To ensure timely participation and technical capability, we recommend logging on a few minutes prior to the conference call to activate your participation. The web cast will be available 72 hours after the presentation for replay at: http://www.3dsystems.com/company/investor/index.asp.
  The web cast will be available for review for 90 days.
  

Forward-Looking Statements

Certain statements made in this release are forward-looking statements. These statements include comments as to the company’s beliefs and expectations as to future events and trends affecting its business. These forward-looking statements are based upon management’s current expectations concerning future events and trends and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors stated under the heading “Forward-Looking Statements” and “Cautionary Statements and Risk Factors” in management’s discussion and analysis of results of operations and financial condition, which appear in the company’s periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from such statements.


About 3D Systems
3D Systems is a leading provider of rapid 3-D printing, prototyping and manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input. These solutions are used for design communication and prototyping as well as for production of functional end-use parts: Transform your products.

More information on the company is available at www.3dsystems.com, or by phoning 888-337-9786, ext. 2882 (or 661-295-5600, ext. 2882 from outside the United States), or via email at moreinfo@3dsystems.com.

Note to editors: 3D Systems, SLA, SLS, DuraForm, Sinterstation, VisiJet and Accura are registered trademarks and SLS, InVision, VisiJet, LaserForm, CastForm, ProCure and Viper are trademarks of 3D Systems. All other product names or services mentioned are trademarks or registered trademarks of their respective companies.

Tables can be found in the pdf version of the press release.