I recently had the opportunity to speak with Peter Leys, executive chairman at Belgium-based 3D printing company Materialise (MTLS 0.19%). I came away from the conversation with the sense that Materialise is a differentiated 3D printing company that appears to be well positioned to capitalize on the overall rise of 3D printing.
The three sides of Materialise
Although Materialise is most well known for its 3D printing software, the company operates three distinct business segments:
- 3D printing software: On a high level, investors can view Materialise's software solutions as the bridge between a 3D design file and a 3D-printed object. Specifically, Materialise's flagship software solutions enable 3D printing service bureaus to operate and monitor a fleet of 3D printers. However, unlike proprietary software solutions from 3D printing manufacturers that are brand-specific in terms of compatibility, Materialise's technology-agnostic approach allows operators to manage a fleet of 3D printers from different manufacturers in one streamlined solution. Boasting an installed base of over 8,000 licensees, Materialise's open 3D printing software ecosystem holds a strong value proposition in the marketplace.
Source: Materialise.
- Medical: The goal of Materialise's medical segment is to improve outcomes for patients through a variety of robust software suites that help doctors preplan surgeries, rehearse complicated surgeries with affordable 3D-printed models, and 3D-print patient-specific medical devices from its FDA-approved 3D printing service bureau. To get an even greater understanding of how Materialise's medical tools work together and help improve medical outcomes, check out the extensive list of medical case studies the company has put together. In terms of opportunity, Materialise's medical segment could offer tremendous long-term potential, considering healthcare-related 3D printing applications have only recently begun increasing in popularity.
- Industrial production: Investors can think of Materialise's industrial production segment as a highly specialized, remotely based Kinko's of 3D printing, in the sense that prospective industrial-focused customers can take advantage of 3D printing technology without needing the expertise to produce a 3D-printed object. Across its service centers in Europe, Materialise operates 114 3D printers, based on five different 3D printing technologies, giving potential customers a high degree of versatility and scale. Speaking of scale, Materialise's industrial production segment produced over 500,000 3D-printed parts in 2013 on behalf of its customers.
Breaking it all down
Here's what each business segment contributed to Materialise's 57.8 million euros in total revenue through the first nine months of 2014:
Source: Materialise.
Although 3D printing software represented 22% of Materialise's total revenue through the first nine months of 2014, in terms of EBITDA, it was the largest profit driver for the company:
Source: Materialise.
How Materialise differs from the crowd
On the software front, Materialise's open ecosystem positions the company as an enabler of 3D printing proliferation throughout the marketplace and could benefit from the overall rise in 3D printing. Consequently, investors could also think of Materialise as being a key partner to 3D printer manufacturers that share the desire to drive higher 3D printing adoption rates.
As a 3D printing service bureau, Materialise is primarily a 3D printing technology implementer rather than a technology producer. This key difference means that Materialise's industrial production business remains well insulated from the threat of disruption because it could simply acquire a new, disruptive 3D printing technology (should one come along) and offer it as an added service to its customers.
Only half the story
Despite its relatively small revenue base and market capitalization of about $390 million, Materialise has delivered over 24 years of consecutive revenue growth. Such a proven track record suggests that the business is well-run and could remain in a position to capitalize on the overall rise of 3D printing. However, before an investment case can be made, prospective Materialise investors should first determine if they feel the company's underlying financials, growth opportunities, risks, and valuation are in favor of them making it a long-term investment.
