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An Upcoming Pure Play 3-D Printing Company IPO

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Those interested in investing in the fast-growing additive manufacturing, or 3-D printing, industry will soon have another option. Germany-based Voxeljet filed for an initial public offering on Sept. 17 to raise up to $100 million. The company will join 3D Systems (NYSE: DDD  ) , Stratasys (NASDAQ: SSYS  ) , and ExOne (NASDAQ: XONE  ) as the pure play 3-D printing companies trading on major U.S. stock exchanges when it lists on the NYSE under the ticker VJET.

Could Voxeljet be an attractive investment? Where does it fit into, and how might it alter, the industry landscape? 

Pricing terms weren't disclosed, so we can't get a feel for valuation, such as price-to-sales or price-to-earnings ratios. But, this tech IPO does have earnings. We can, however, look at some financials and potential competitive advantages.

Big build boxes & big competition
Voxeljet provides high-speed, large-format 3-D printers and on-demand parts services to industrial and commercial customers. It offers five platforms priced from $163,000 to $2.1 million. The company was founded in 1999, and one of the founders and the key inventor of its technology, Dr. Ingo Ederer, is CEO. 

It's not involved in the consumer market, so in this respect, it's more similar to ExOne, an industrials pure play. 3D Systems and Stratasys offer primarily consumer and commercial printers. Also like ExOne, its on-demand parts printing service accounts for a large portion (55% in the first half of 2013) of its business. It's now in the process of more than doubling the size of its German service center -- which it believes to be one of the largest in the EU --  to 40,000 sq. ft. and plans to use IPO proceeds to establish service centers in North America and Asia.

Its printers use powder binding technology, which involves chemical binding agents used to bind together the material being printed. ExOne uses a similar technology. Voxeljet's printers have several sand and plastics capabilities. It's currently developing new material sets, including additional sands, PMMA-based plastics (think Plexiglas), ceramics, silicon carbide, tungsten carbide, wood powder, and cement.

ExOne is the primary competitor on the sand end, as its machines also produce sand molds, which industrial customers use to cast metal components. ExOne also sells machines that have industrial metals and glass capabilities. 3D Systems and Stratasys are competitors on the plastics end. 

Given the similar technology and sand-based castings focus, it's not a surprise that there's a Voxeljet-ExOne link. In 2003, Voxeljet granted ExOne exclusive rights to make and sell machines related to certain patents and technology using binders and sand-based casting in return for royalty payments. Voxeljet can use these patents for printers working with plastics. The prospectus states: "We believe these restrictions will not materially impact the growth of our business, as we have developed processes which do not rely upon the subject patent portfolio and associated agreements." 

The obvious question: How do these two companies' sand-based castings technologies compare? 

I don't have input at this point, but it's a question ExOne investors and those considering investing in Voxeljet should explore. These companies are direct competitors. Further, they're now each expanding or planning to expand in the other's home turf. Voxeltjet plans to open service centers in North America as well as Asia. And ExOne announced in August that it's building a facility that will double its footprint in Germany.

Voxeljet serves the foundry, auto, heavy equipment, power fluid handling, and aerospace industries. Customers include Daimler, BMW, Ford, Hyundai, Volkswagen, Porsche, 3M, and Liebherr Group (a manufacturer of construction equipment and aircraft parts). Its commercial focus is on the film and entertainment, architecture, medical products, and consumer products industries.

Propshop, which makes props for the entertainment industry, is a major customer. (Voxeljet and Propshop got a lot of press for producing the stunt-double Aston Martin cars used in the 2012 James Bond film "Skyfall.") 

Competitive advantages?
According to the prospectus, the company believes its competitive advantages include: "the size of our build platforms, our printing speeds, the volumetric output rate of our 3D printers and the variety of qualified material sets that we offer to commercial and industrial customers."

The materials claims are subjective, but I'll be digging into the build box and speed claims. The company's VX4000 system, its priciest at $2.1 million, does have a huge build box -- 4,000 x 2,000 x 1,000 mm (157.5 x 78.7 x 39.4 in.). 

Its VXC800, introduced in 2012, also looks interesting. It has just two dimensions, meaning it can be incorporated into customers' production lines. The company believes it is the only continuous build 3-D printer on the market. 

Voxeljet's 2012 revenue was $11.3 million, operating profit was $876,000, and net profit was $276,000. So, operating and profit margins were 7.7% and 2.4%, respectively. For the first half of 2013, revenue was $5.8 million, flat on a year-over-year basis because of capacity constraints, and its net loss was $489,000. The loss was due to the production cost associated with one higher-end printer, one of the first the company has sold. This is par for the course, as costs involved with producing the first few models of most products are typically much higher than subsequent costs.

Revenue increased 83% from 2010 to 2012, so revenue growth for the near term looks good. The company had a backlog of $6.6 million, comprised of seven printers, at the end of June. It anticipates the vast majority of these will ship by year's end. It sold three printers in the first half of 2013 at a lower average price, so this segment could potentially experience 100%+ sequential half-year revenue growth. 

The Foolish takeaway
Voxeljet appears to be a potentially attractive investment. Of course, pricing matters (even in hot industries!), so investors should wait until pricing info is released before deciding on a potential move. 

ExOne investors in particular should follow Voxeljet's progress, given these companies are both heavily focused on the sand molds for castings space. Likewise, those investing in Voxeljet should stay abreast of ExOne's performance. One may prove the superior long-term investment. However, given the high projected growth rates in this space, they could both do well.

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