Competition Among 3-D Printer Makers Could Heat Up as SLM Solutions Explores a Potential IPO

Germany-based SLM Solutions has hired Deutsche Bank and Credit Suisse to explore a potential IPO, according to a recent Reuters article, which cited two unnamed sources. If this information proves accurate and SLM lists on a U.S. stock exchange, it would join 3D Systems Corp. (NYSE: DDD  ) , Stratasys Ltd., ExOne Co. (NASDAQ: XONE  ) , Arcam AB (NASDAQOTH: AMAVF  ) , and voxeljet AG (NYSE: VJET  )  as 3-D printing companies trading on U.S. exchanges. (While Arcam is listed on the Nasdaq OMX Stockholm, it also trades over-the-counter in the U.S.)

Could SLM Solutions be an attractive investment? And where does SLM fit into the 3-D printer-maker landscape?

Laser melting tech, industrial metals focus
SLM Solutions uses selective laser melting, or SLM, technology. It's an industrial metals focused 3-D printing company, which reportedly has customers in the automotive, aerospace, construction, consumer electronics, and medical device industries. In addition to making 3-D printers, SLM also produces vacuum casting and investment casting systems.

Last year, DPE Deutsche Private Equity bought a 57% stake of SLM Solutions, which provided the company with capital to be used for expansion. The rest of the company is owned by the founding partners.

SLM's corporate lineage is a bit complicated, and its roots go back quite a bit, so I'm just going to cover its more recent history. The company was formerly known as (no, not Prince) MTT Technologies GmbH, or more commonly, the German branch of MTT Technologies. There was also a U.K. branch of the company, as MTT had split into two branches in 2010. The German branch was renamed SLM Solutions, while the U.K. operation was bought by Renishaw Plc.

The metals 3-D printing space: 3D Systems Corp., ExOne Co., and Arcam
SLM Solutions' publicly traded competitors appear to be 3D Systems Corp., ExOne, and Arcam, as these three companies all make 3-D printing systems that can print in metals. 3D Systems acquired metals capabilities when it bought Phenix Systems last summer, and while metals comprised just a very small percentage of its business in 2013, the company expects its nascent metals business to quadruple in 12 to 18 months. ExOne offers systems that can print in metals, as well as sand and glass, while Arcam is a pure-play on industrial metals 3-D printing. Neither Stratasys nor voxeljet offer systems that have metals printing capabilities, though it's just a matter of Stratasys finding the right acquisition, in my opinion.

I'll be digging further into the competitive landscape if SLM does, indeed, announce that it's going public. As I recently wrote, the metals 3-D printing space seems to be the place to be in 2014 and beyond.

Revenue puts SLM in Arcam's and ExOne's (at the time of its IPO) leagues
According to the Reuters article, SLM Solutions generates more than 20 million euros, or about $27.8 million, in annual revenue, and is profitable. If this revenue data is accurate, SLM Solutions is nearly two-and-a-half times as large -- from a revenue standpoint -- as fellow German 3-D printing company voxeljet was when it went public in October 2013. Voxeljet's 2012 revenue was $11.3 million, while its first half 2013 revenue was $5.8 million.

Further, nearly $28 million in annual revenue puts SLM in Swedish 3-D printing company Arcam's league, as Arcam generated revenue of 199.4 MSEK (million Swedish Krona), or about $31.0 million, in 2013. Finally, if SLM goes public soon, it would be nearly exactly the same size as ExOne was when it went public. ExOne, which IPO'd in February 2013, generated revenue of $28.7 million in 2012.

Foolish bottom line
We'll need more details, of course, to determine if SLM Solutions would make for a potentially attractive investment. That said, based upon the very limited information available, SLM does seem like it could be a stock worth exploring. Its industrial metals focus could make for an attractive niche, and it's certainly a plus that the company, if the Reuters information is accurate, is profitable. 

The 3-D printing stocks -- 2013's darlings -- have cooled down in 2014. They've had an especially tough week this week, with ExOne's much weaker-than-expected fourth-quarter 2013 results and light 2014 guidance dragging down the sector. Even though SLM is a few months late to the party, it still seems likely it could go public soon. That's because, while the overvalued 3-D printing stocks are correcting, there still appears to be solid support for 3-D printing's ability to revolutionize manufacturing, health care, and other segments of our economy over the long term.

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