Not all 3-D printer stocks should be created equal. ExOne (XONE +0.00%), the newest addition to the 3-D printer sector rocketed over 46% higher during its first day of trading. The IPO of this industrial 3-D printing company priced at $18, which was $2 above the expected $14-$16 range. ExOne raised about $90 million on the sale of 5 million shares, which should help grow its business. Before investors get excited about the growth prospect of industrial 3-D printers, they should be made aware of the sobering reality that ExOne's business has barely left the gate.
They sold how many?
For a company that's in the business of selling 3-D printers, unit sales are great way for investors gauge interest of its products. During the first nine months of 2012, ExOne sold a whopping five, yes five printers. For all of 2010 and 2011, the company sold a total of four printers each year. Not only is this an absurdly low number, the rate at which ExOne can produce printers appears to be painstakingly slow. The company shipped seven printer units during the fourth quarter of 2012, yet only sold five printers in the first nine months of 2012, indicating that some of these printers were ordered in 2011. Naturally, the company believes that this increase in shipment volume is a strong indication of acceptance for its technology in the marketplace. At the end of 2012, ExOne had six additional printer units in its backlog, which is expected to bring in an additional $7.8 million in revenue. Each printer in this backlog has a price tag between $800 thousand and $1.4 million.
An emerging growth company
Since ExOne's inception, the company has not generated operating profits. For the first nine months of 2012, the company earned $15.9 million in revenue, a 27% increase over the first nine months of 2011. During the 2012 period, the company lost $11.1 million, prior to adjusting for a $7.7 million expense related to equity based compensation. On a per-share basis, this lost amounted to $1.21 during the first, which compares unfavorably to the first nine months of 2011, when the company lost $0.53 a share.
Segment breakdown:
|
Segment |
Full-Year 2010 |
Percentage of Total |
Full-Year 2011 |
Percentage of Total |
|---|---|---|---|---|
|
Services |
$7.8 |
58% |
$9.9 |
65% |
|
Printers |
$5.6 |
42% |
$5.4 |
35% |
|
Total |
$13.4 |
100% |
$15.3 |
100% |
Source: ExOne preliminary prospectus. All dollar figures in millions.
Given the high cost structure of the company's high-end industrial printers, it's not surprising to see customers opting to utilize ExOne's manufacturing services over taking delivery of a printer. In this context, ExOne is currently more of a specialized manufacturer that's hired for jobs than it is a 3-D printing purveyor. Well aware of this fact, the company is planning to open 10 more of its production service centers by 2015, bringing the total number to 15.
A-list customers
For its size, ExOne's customer list is quite impressive, which includes high profile companies like Caterpillar, Ford, Boeing, BMW, Tesla Motors, Deere, and ITT. In other words, ExOne appears well-known within the industries where it's currently seeking new growth, and could potentially be problematic for its expansion plans. Naturally, the company's revenues were concentrated between the aerospace, automotive, heavy equipment, and the energy industry, further putting the company at risk to industry disruptions.
Low overlap
What makes ExOne's printers unique is that they can print industrial sized metal objects as large as 70 x 39 x 27 inches. Although 3D Systems (DDD 6.52%) offers the capacity to print metal objects, it can only do it but on a much smaller scale. Its sPro line of direct metal printers can currently print objects as large as 12.6 inches in length, making this line an unlikely candidate for industrial applications. Stratasys (SSYS 3.22%) does not offer the capacity to print with metal, but its thermoplastics can be metal plated for aesthetic purposes. ExOne also recognizes EOS as a major competitor in the industrials market, but overall, the industrial 3-D printer market is less crowded than where 3D Systems and Stratasys operate.
A long way to go
To many investors, large-scale metal 3-D printing is the holy grail of 3-D printing, which they expect to have profound implications far beyond the manufacturing line. At this time, it appears that the promise and hope of ExOne has exceeded its track record. Investors must recognize that ExOne sells an extremely costly and specialized product that's only been sold a handful of times. This could indicate that perhaps the industrial 3-D printing market may be more niche-like than anything else. But more importantly, it indicates that ExOne is extremely unproven on a larger scale. Challenges will arise and how ExOne overcomes these challenges will dictate its long-term value to the market. With that being said, 3D Systems still remains my personal favorite 3-D printing investment.
