Several years ago, before ExOne (NASDAQ:XONE) was a publicly traded company, it was awarded a contract to develop a system around complex 3D-printed molds and metal castings for aviation applications on behalf of Sikorsky, a United Technologies (NYSE:UTX) company that primarily produces helicopters for militaries around the world.
Specifically, the project was related to Sikorsky's still in development S-97 Raider helicopter, and thus far, ExOne has spent approximately $1 million in getting its processes and systems in place to handle the scope of the project. Although the inaugural project officially concluded in the fourth quarter and only generated a nominal amount of revenue for ExOne over its lifetime, Sikorsky was pleased with the results and has awarded ExOne with an additional project that this time involves the U.S. Army.
In the following video, 3D printing specialist Steve Heller interviews David Burns, ExOne's global head of sales about the nature of the initial project with Sikorsky, if the $1 million it invested was well spent, and whether it can pave the way for future business opportunities.
A full transcript follows the video.
Steve Heller: In terms of specifics here with ExCast and its projects, I know you guys have worked with Sikorsky, which is a United Technologies company. They make helicopters for the military.
What was the nature of this project? What was the problem that Sikorsky came to you with and what were you guys trying to solve?
David Burns: Sikorsky came to us specifically because they had a casting grouping for a new flight application they were looking at, and the characteristics they wanted in those castings weren't clearly going to be available without 3D printing as an element of the process.
When we began to collaborate, we realized we were working really hard on the front end, on design with them, to be sure that the design itself was going to be printable. Then of course we needed to heavily interface with the foundry to be sure that they could pour the design we created. Suddenly, there was a process chain that was beginning to form up around the entire casting itself.
At some point Sikorsky said, "It would be really helpful -- since you're already at the design phase, the 3D printing phase, and the casting phase, why don't you just take responsibility to then get it machined, x-rayed, and certified, and deliver that to us because we as Sikorsky don't necessarily want to manage that process."
I would say it was evolutionary, and of course as we reported often on our earnings calls, the process was bumpy and hard, and there was a lot of learning to be had. But I think most hard things are like that, and we do feel as if we learned an extraordinary amount.
We are well honed now. We are staffed well and organized well to execute full casting projects, and we're pleased with the progress we've made. While it may have been expensive and it may not, from a timing perspective, have been exactly what we initially hoped for, I think both sides are really pleased and we continue to do a lot of work with Sikorsky and other DOD [Department of Defense] projects.
Heller: From what I've gathered, it cost about $1 million, what came out in the last conference call, so far for Sikorsky and getting ExCast up to speed. I'm not really sure of the revenue figures, but I believe it's probably a nominal amount at this point. I think there were a lot of up-front costs for you guys.
Do you look at that as money well spent at this point, or do you think there's more money to be spent? The return on investment, do you think it's really going to pay off?
Burns: I do, Steve. Of course that's a hard question to answer. The initial project we did with Sikorsky is concluded, for all intents and purposes.
We have launched a secondary project with them which actually, from a revenue perspective, is going to have more revenue in it than the first project did. Our expected cost pattern against that [second project] will be far lower; we know that.
We have an excellent team in place now to do exactly what we're trying to do. I suppose you can look back retrospectively and say, "We wish we'd known before," but we didn't -- but we do now.
We're very encouraged by what we think is going to happen with Sikorsky next, and beyond that there's a myriad of other opportunities laying out there that, if we choose to execute them, we think are going to be really good for ExOne, and good for our customers.
Heller: It lays the foundation for opening up ExOne into more defense-related contracts, is what I'm gathering.
Burns: I think that's a fair statement, yes.
Steve Heller owns shares of ExOne. The Motley Fool recommends ExOne. The Motley Fool owns shares of ExOne. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.