IPO Preview: ExOne

| About: ExOne (XONE)
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Based in North Huntingdon, PA, ExOne (NASDAQ:XONE) scheduled a $75 million IPO with a market capitalization of $192 million at a price range mid-point of $15, for the week of February 4, 2013.

Eight IPOs are scheduled for the week of February 4. The full IPO calendar is available here.

S-1 filed January 28, 2013.

Manager, Joint Managers: FBR
Co Managers: BB&T Capital Markets/ Stephens

XONE is in a hot sector: 3D Printing or Additive Manufacturing.

XONE shipped 4 systems in 2012, shipped five systems for the September 2012 nine months and shipped eight (yes 8) systems in the December 2012 quarter, after shipping 5 systems for the nine months ended September 2012. XONE shipped only four systems in 2011.


Stock price increases last 12 months.

Stratasys Ltd. (NASDAQ:SSYS)  


3 D Systems (NYSE:DDD)  



Buy XONE on the IPO. Shipping of 8 machines in the December 2012 quarter may not be fully recognized, yet, by the stock market.

AM technologies: Additive Manufacturing
PCS: Production Service Centers

XONE is a global provider of 3D printing machines and printed products to industrial customers.

Their business primarily consists of manufacturing and selling 3D printing machines and printing products to specifications for customers using XONE's in-house 3D printing machines.

XONE offers pre-production collaboration and print products for customers through Product Service Centers or PSCs, which are located in the United States, Germany and Japan.

XONE builds 3D printing machines at facilities in the United States and Germany. XONE also supplies the associated products, including consumables and replacement parts, and services, including training and technical support, necessary for purchasers of machines to print products.

Machine Unit Shipments
During the three month period ended December 31, 2012, XONE shipped eight machine units to end customers globally. XONE had no machine unit shipments to end customers during the three months ended December 31, 2011.

XONE believes the significant increase in machine unit shipments for the three month period ended December 31, 2012 is a strong indicator of the increased acceptance of XONE's 3D printing technology in the marketplace.

XONE had six ordered and undelivered machine units at both December 31, 2012 and December 31, 2011 (five S Max units and one S Print unit at December 31, 2012 and four S Max units, one S Print unit and one Orion unit at December 31, 2011).

As XONE's infrastructure grows, XONE intends to shift its strategic focus to opening additional PSCs in order to broaden the potential global customer base and to expanding 3D printing capability in an increasing variety of industrial materials.

XONE therefore plans on continuing to increase operating expense to support the anticipated increase in revenue.

3D printing is the most common type of an emerging manufacturing technology broadly referred to as additive manufacturing ("AM").

In general, AM is a term used to describe a manufacturing process that produces 3D objects directly from digital or computer models through the repeated deposit of very thin layers of material. 3D printing is the process of joining materials from a digital 3D model, usually layer by layer, to make objects using a printhead, nozzle or other printing technology.

The terms "AM" and "3D printing" are increasingly used interchangeably as the media and marketplace have popularized the term 3D printing rather than AM, the industry term. AM represents a transformational shift from traditional forms of manufacturing (e.g., machining or tooling), sometimes referred to as "subtractive" manufacturing.

XONE's 3D printing process differs from other forms of 3D printing processes in that XONE uses a chemical binding agent and focuses on industrial products and materials.

XONE believes that its industry advantage lies in the materials that XONE machines are able to print. XONE is capable of printing in silica sand, ceramics, stainless steel, bronze and glass, and is are in varying stages of qualifying additional industrial materials for printing, such as titanium, tungsten carbide, aluminum and magnesium. In contrast, the majority of the AM industry generally utilizes polymer materials.


XONE's top five customers represented 46% and 42% of total revenue for the nine months ended September 30, 2011 and 2012, respectively, and 43% and 47% of total revenue in 2010 and 2011, respectively.

These customers primarily purchased 3D printing machines. Sales of 3D printed parts and consumables tend to be from repeat customers that may utilize the capability of PSCs for three months or longer. Sales of 3D printing machines are low volume and generate significant revenue but the same customers do not necessarily buy machines in each period.

Purchases of XONE's 3D printing machines often follow a seasonal pattern owing to the capital budgeting cycles of customers. Generally, machine sales are higher in our third and fourth fiscal quarters than in the first and second fiscal quarters.

Patents and MIT Licenses
XONE's technology is covered by a variety of patents or licenses for use of patents.

XONE is the worldwide licensee of certain patents of the Massachusetts Institute of Technology ("MIT") for certain AM printing processes (the "MIT Patents"). XONE has exclusive rights to practice the patents in certain fields including the application of the printing processes to metals (with sublicensing rights), and non-exclusive rights to practice the patents in certain fields including the application of the printing processes to certain non-metals (without sublicensing rights).

Some Patents Expiring
Certain of the MIT Patents under which XONE are licensed will expire over the next 24 months.

XONE believes that the expiration of these licenses will not impact the business, however the expiration may allow competitors that were previously prevented from doing so to utilize binder jetting 3D printing.

However, XONE has developed know-how and trade secrets relative to 3D printing technology and believe that the early entrance into the industrial market provides XONE with a timing and experience advantage.

Through an investment in the technology, XONE has been able to qualify industrial materials for use in XONE 3D printing machines, and XONE intends to continue such efforts.

Some of the companies that have developed and employ one or more AM technologies include: 3D Systems Corporation (including the recently acquired Z Corporation), Stratasys (including the recently acquired Solidscape, Inc. and Objet Ltd.), EOS Optronics GmbH, EnvisionTEC GmbH, and Solid Model Ltd.

SSYS's financial statements

No dividends

XONE expects to net $68 million from its IPO.

XONE intends to use the net proceeds of this offering to invest in further improving the efficiency and capacity of its machines and

To expand the number of materials from which XONE can make products, to increase the number and locations of PSCs, for working capital and other general corporate purposes.

Repay $9.8 million of revolving debt financed by Kent Rockwell's (Chairman & CEO) Trust.

Use $3.0 million to acquire the assets and assume certain liabilities of TMF and Lone Star, XONE's variable interest entities.

Disclaimer: This IPO report is based on a reading and analysis of XONE's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

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. I have no business relationship with any company whose stock is mentioned in this article.