voxeljet (NYSE:VJET) had an impressive IPO last week. Although the stock was priced at the low end of the expected range, the stock vaulted 121% on its first day of trading. The stock is now part of a publicly traded group of 3D printing stocks, which includes 3D Systems (NYSE:DDD), Stratasys (NASDAQ:SSYS) and ExOne (NASDAQ:XONE). voxeljet is based in Germany, and serves the European markets, with plans to expand globally.
voxeljet is a leading manufacturer of industrial 3D printing systems and operates, what it believes is one of Europe´s largest service centers for the "on-demand production" of moulds and models for metal casting. The company has two business segments:
1. voxeljet systems business division, which focuses on the development, production and distribution of the market´s fastest and most powerful 3D printing systems. Today, voxeljet has a well-coordinated product range that reaches from smaller entry models to large-format machines, and therefore offers the perfect 3D print system for many application areas.
2. voxeljet services custom parts service centre, which creates sand moulds and plastic models based on CAD data on demand. Small-batch and prototype manufacturers appreciate the automatic, patternless manufacture of their casting moulds and 3D models. The company's customer base includes well-known automotive manufacturers and their suppliers, foundries as well as innovative companies from the arts design as well as the movie and entertainment industry.
voxeljet's has two important competitive strengths: build box size and volumetric output rate. The size of the build box is important to industrial and commercial customers, who may want to produce large-scale industrial parts or large quantities of discrete parts in one batch. voxeljet currently offers five 3D printer platforms with varying build box sizes. The company's VX4000 system offers a build box of 4,000 x 2,000 x 1,000 millimeters, which is six times the volume of the next largest commercially available 3D printer. Due to its build box sizes and print speeds, voxeljet's 3D printers provide high output efficiency, as measured by the rate of volume output per hour, relative to competing additive manufacturing technologies. The above mentioned VX4000 system features a volumetric output rate of 123.0 liters per hour, which the company believes is the highest in the industry. This enables the company to produce parts at a cost and speed that is attractive relative to traditional manufacturing alternatives, which effectively expands its addressable market.
voxeljet also has strong customer relationships. The company is an early entrant in the market for additive manufacturing industrial part production, and has a reputation for providing high-quality systems and services and has relationships with many leading multinational customers, including Daimler, BMW, Ford (NYSE:F), Hyundai, 3M Company (NYSE:MMM), 3D Systems, Volkswagen and Porsche, as well as other key users of additive manufacturing in the film and entertainment industry, such as Propshop Modelmakers. Many of the customers that were mentioned are working with voxeljet for over a decade. Voxeljet used its 3D printing method to create the three Aston Martin DB5 models that doubled for the now priceless original vehicle from the 1960s in the last year's James Bond film "Skyfall".
voxeljet's growth strategy comprises of the following elements:
1. Enable adoption of its additive manufacturing technology. voxeljet is providing its customers the ability to use its technology either through on-demand parts services or through the purchase of 3D printers. New customers usually begin with the purchase of parts which voxeljet prints in its on-demand parts service center. The next step for the customer is to either increase the volume of their on-demand parts orders or to purchase one of voxeljet's 3D printers, or both.
2. Expand capacity through the development of high-volume service centers in key geographic locations. Development of large-scale service centers will allow the company to increase the economies of scale and maximize return on investment for its on-demand parts business. The company is in the process of expanding its existing European service center, and plans to establish new service centers in North America and Asia.
3. Invest in research and development. voxeljet has introduced five printer platforms since 2007, and the company plans to introduce a sixth printer platform during the fourth quarter of 2013. The company has spent 18% of its revenue on research and development in the last two years.
4. Expand sales and marketing presence. voxeljet plans to increase its sales of 3D printers and on-demand parts by adding sales agents and increasing marketing efforts. The company also aims to expand its marketing efforts beyond Europe, and particularly in North America and Asia, together with its geographic expansion in those regions.
5. Further penetrate the targeted industry verticals. The company is seeking to capitalize opportunities in its targeted industry verticals which include: automotive, aerospace, film and entertainment, art, architecture, engineering, packaging, education, medical and consumer products
The worldwide market for additive manufacturing products and services has expanded from $1.3 billion in 2010 to $2.2 billion in 2012, according to the Wohlers Report 2013. The Wohlers Report projects the worldwide additive manufacturing products and services market to reach approximately $6.0 billion by 2017 and $10.8 billion by 2021, representing compound annual growth rates of 22% and 19% respectively.
Publicly traded 3D printing companies have enjoyed these growth trends, with significant share price increases over the last two years. 3D Systems and Stratasys have enjoyed tremendous runs in the last two years, and ExOne is up almost 200% since it went public in early February. Arcam AB (OTCPK:AMAVF) is a Swedish 3D printing company which has low liquidity, but has also delivered a strong run, mimicking the trends of its larger competitors. It would not be surprising if ExOne, voxeljet and Arcam where acquired by 3D Systems and Stratasys, as both companies are looking to expand their presence in the 3D printing market and broaden their product offerings.
One of voxeljet's targeted markets is Asia, and more particularly, China. China is expected to be the fastest growing 3D printing market in the future. China accounted for $163.4 million of the estimated $2.1 billion 3D printing market in 2012, and is expected to exceed $1 billion in the next three years and might become the world's largest 3D printing market by 2016. I wrote extensively about 3D Systems' and Stratasys' expansion in China, and argued about the importance of their presence in this fast growing region. Stratasys has signed an agreement with The Aurora Group in late September. This exclusive distribution deal will enable Stratasys to expand the presence of its professional desktop 3D printers in China. 3D Systems is also present in China, and revenue in the Asia-Pacific region grew 92% in 2012.
voxeljet may have a much larger addressable market than the worldwide market for additive manufacturing products. The company believes that the machine tools market and the metal castings industry represent significant short and long-term revenue opportunities due to the advantages of its technology and the early adoption of additive manufacturing technologies in these markets. The global market for machine tools totaled $93.2 billion in 2012, according to the 2013 World Machine Tool Output & Consumption Survey. Additionally, the metal casting industry produced 98.6 million metric tons of metal castings in 2011, and the United States shipped $32.4 billion in metal castings in 2012.
voxeljet made money last year, but its earnings were negative in the first six months of 2013. Its price to sales ratio and EV/sales ratios can be compared to Arcam and ExOne, since these companies trade at similar valuations, and are practically at the same growth stage. voxeljet is currently trading at 26.7 P/S and the same rate of EV/sales. Arcam is trading at 21.4 P/S and 17.3 EV/sales, while ExOne is trading at 19.6 P/S and 18.8 EV/sales. So, it seems that voxeljet is currently overvalued when compared to its closes peers. 3D Systems and Stratasys are trading around 13 P/S and EV/sales, but they are in a more advanced stage, and are expected to grow at a slower rate than voxeljet, Arcam and ExOne.
voxeljet is still in its early stages of growth, and there are many risks the company is facing. With such a high valuation, the future growth and management execution must be exceptional, and there is little room for error. The 3D printing industry is getting very competitive, and more companies will try to take advantage of the fast growing industry. The latest example is Hewlett Packard (NYSE:HPQ), which plans to enter the 3D printing market in mid-2014. voxeljet also has long sales cycles which make the timing of its revenues hard to predict, and which might have a negative short-term impact on its share price.
Use of proceeds
voxeljet intends to use the net proceeds of the offering for the following purposes:
- Approximately $40 million for expansion of its on-demand parts service center in Europe and establishment of new on-demand parts service centers in North America and Asia.
- Approximately $10 million for research and development and sales and marketing initiatives.
- The remainder will be used for general corporate purposes, including potential acquisitions.
The proceeds of the offering should boost the company's growth, as it expands into new geographies, and ramps up its sales and marketing activities.
voxeljet stands to benefit from the growth in the 3D printing industry. The company is well positioned in Europe, with great relations with its large companies, and is looking to expand globally. voxeljet's two main competitive advantages, build box size and volumetric output rate, will help the company to expand its presence in the 3D printing market. However, I am concerned with such a high valuation, and I would want to see more trading history, since stocks that go public tend to be very volatile.
Additional sources: voxeljet SEC filings
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.