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Magnus René is the President and CEO of Arcam AB, a Swedish 3-D printing /additive manufacturing company publicly traded on the NASDAQ OMX under the ticker ARCM.ST and in the United States as an American Depository Receipt under the ticker OTCPK:AMAVF / AMAVF
My prior due diligence of Arcam AB published on Seeking Alpha on July 23 can be reviewed here.
3D Printing Investor: Thank you Magnus, for taking the time to introduce readers of Seeking Alpha to Arcam AB. Congratulations on a very strong first half of 2013 financial report. When converting from SEK to USD, Arcam AB made .30/share in the first six months of 2013 vs. .05/share for the same period last year, so it was a very good 1st half for Arcam.
Can you give readers a little history on Arcam AB… how it was formed, who are the key people that started the company, and what the mission of Arcam AB is today?
The company was founded in 1997 and is today listed on NASDAQ OMX Stockholm, Sweden. Head office and production facilities are located in Mölndal, Sweden. Support offices are located in the US, the UK, Italy and China.
Arcam develops and manufactures equipment for the Additive Manufacturing of components from three-dimensional models using metal powders. Target markets are manufacturers in the orthopedic implant and aerospace industries.
Arcam's long-term objective is to be the leading supplier of Additive Manufacturing systems in metals.
3D Printing Investor: Can you explain how the EBM (Electron Beam Melting) technology used by Arcam differs from other methods of additive manufacturing? What are the advantages of EBM for 3-D printing over other technologies used by Stratassys (NASDAQ:SSYS), 3D Systems (NYSE:DDD), and ExOne (NASDAQ:XONE) for example?
The EBM technology provides a number of advantages compared with other additive metal technologies, the most important ones:
- EBM uses an electron beam as the energy source, not a laser. This gives a much higher power capacity, today up to 3500 W and the future even considerably higher, which is advantageous in several ways.
- EBM builds in vacuum, not in a protective gas. The vacuum ensures very high purity of the material, which is of great importance in for example implant manufacture. Building in vacuum also enables to work with reactive materials such as titanium without reaction with oxygen, which otherwise would cause alpha casing and contaminate the unused powder. Instead, the Arcam Powder Recovery System enables to recycle any unused powder, and use it for new builds (saving you money).
- Thanks to its high power capacity EBM can build at a high temperature in the build chamber, typically about 700 C for titanium. This gives a fine microstructure, high ductility and good fatigue characteristics. It also mitigates residual mechanical stresses, enabling you to build large parts without any subsequent warping or dimensional change.
- Its high power capacity means that EBM can melt the powder faster, giving you a higher build speed. This becomes increasingly important when you move from Rapid Prototyping into Rapid Manufacturing, where productivity becomes a major factor.
3D Printing Investor: I assume Arcam AB's technology, especially with regards to EBM is patented. How many patents do you hold globally, and do you have patents granted or pending in the United States?
Arcam applies for patents on its process knowledge as well as on the key components in its systems. Patents are initially applied for through PCT (Patent Cooperation Treaty - international patent applications) and/or EPO (European Patent Organisation), after which application is made in ten strategic countries to provide broad international protection.
As of today we have around 30 patent families (inventions). Most of those are granted in the US.
3D Printing Investor: Arcam recently launched a new printer for the orthopedic market, the Arcam AQ 10. What are the upgrades in this system over the one it's replacing?
Arcam's new EBM system, Arcam Q10, is developed in close collaboration with leading implant manufacturers. The system is designed to meet the implant industry's need for ease of use, productivity, accuracy and quality assurance.
Arcam Q10 includes several new features for industrial volume production, including increased productivity, high resolution, and Arcam LayerQam™, a new camera-based monitoring system for continuous quality assurance.
3D Printing Investor: In February, Arcam entered into a strategic alliance with DiSanto Technology Inc, based in the United States. What products does DiSanto Technology manufacture, and how will this partnership benefit Arcam AB?
DTI was founded by Ottavio DiSanto in 1967 as a general contract manufacturer. Over the years, the company has specialized in contract manufacturing of orthopedic implants and today the company has a clientele consisting of major orthopedic device companies. DTI provides its customers with engineering, development and production of implants and instruments of metal and plastic implants and components. DTI is certified to ISO 9001, ISO 13485 and the company is registered with the FDA as a contract manufacturer.
The parties will offer customers, including industry-leading orthopedic and spinal implant companies, comprehensive product application development and manufacturing of EBM-based implants and other components.
By offering the combined capabilities of both organizations to each of their existing and new customers, the strategic alliance will serve to accelerate market adoption and penetration of commercially manufactured, finished EBM-based implants and components. The strategic partnership will leverage Arcam's EBM technology with DTI's expertise in engineering and producing finished components.
3D Printing Investor: How many printer systems did you sell in the first half of the year, and how are orders shaping up for the second half of the year? Also, what is the average length of time between when you receive and order and delivery?
We shipped 11 systems in the first half of the year and we had 12 system orders in the order book in end of June.
Lead time from order to delivery can vary a lot but is on average 3 months.
3D Printing Investor: Will Arcam be presenting their products at any additive manufacturing, or specific industry conferences in the next few months?
Yes, for example:
RM Forum, Milan, Italy, Sept 19-20
TCT 2013 - Birmingham, UK, Sept 25-26
NASS 2013 (North America Spine Society), New Orleans, LA. Oct 9-12
AIRTEC - Frankfurt, Germany, Nov 5-7
EUROMOLD - Frankfurt, Germany, Dec 3-6
3D Printing Investor: What geographic markets does Arcam operate in currently, and is the company looking to expand into a particular country or enter a new geographic market over the next 12 months or so?
We sell today actively in Europe, US, Japan, China and Korea and we have agents or own sales organizations targeting those areas. We have subsidiaries for support in the US, UK, Italy and China.
We are not planning to expand beyond those geographic areas short term.
3D Printing Investor: Arcam AB had an 80% increase in sales for the first half of this year compared to last year, and that growth was all organic. Do you have any plans for a potential acquisition down the road?
We have an option to acquire our strategic partner DiSanto Technology. More than that we have no acquisition plans.
3D Printing Investor: Arcam is involved in several industrial markets, but the two largest appear to be the aerospace and orthopedic implant industries. Looking at your revenue mix, what percentage of revenue is coming from the aerospace industry, and what percent is coming from the orthopedics/implant industry? Do you see those percentages changing over the next year or two, or remaining the same?
At present about half of the sales is from each of the targeted segments. We think that the aerospace market has potential to grow faster than the orthopedic market and thus the aerospace segment will over time be larger.
3D Printing Investor: While researching Arcam AB, I found some mention of a "FastEBM Project" and it appears Arcam is playing a key role in it. Can you talk about that project with our readers?
Two research projects led by Arcam started the second half of 2011 and will last for two years, "Fast EBM" and "HiRes EBM". The projects, which are financed by the EU through the Seventh Framework Programme (FP7), are managed by Arcam and involve several leading research institutions and customers linked to Arcam. The financing totals about 20 MSEK and the project results will benefit Arcam's long-term development. Arcam leads and coordinates the two programs, and has secured the intellectual property rights in them.
The Fast EBM project has the objective to develop EBM technology with much higher power than today's systems while the objective of the HiRes EBM project is to develop technology for considerably higher resolution.
The technology developed will be incorporated into future products from Arcam, but that is not part of the FP 7 programmes.
3D Printing Investor: Last question. Arcam AB reported strong growth for the first half of 2013. Do you see a continuation of that growth in the second half of the year?
With the good growth in first 6 months of 2013 and the strong order book we have a solid foundation for continued strong growth in 2013 and beyond.
3D Printing Investor: Thank you again Magnus for taking the time to introduce readers at Seeking Alpha to Arcam AB, and best wishes for continued success.