ExOne Focusing On Industrial 3D Printing Applications

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ExOne ( XONE ) sold just 13 3D printer systems last year, but it was enough for it to launch an initial public offering in late February 2013 that soared 47% on its first day of trading.

ExOne became the third publicly traded firm on U.S. markets that makes 3D printers, the others being3D Systems ( DDD ) andStratasys ( SSYS ), which have a much longer track record and much higher revenue.

"ExOne is a relatively new company, but what they are doing is unique," said Holden Lewis, an analyst with BB&T Capital Markets. "The industry as a whole is growing quickly and ExOne doesn't really compete with 3D Systems and Stratasys."


According to Lux Research, 3D printing will be an $8.4 billion market in 2025, up from $777 million last year, led by automotive, medical and aerospace applications. Long term, it has potential to reshape the manufacturing ecosystem. In the near term, it will have the most impact making products in small volumes that require high customization, Lux reported.

3D printers use liquid or powder materials and other chemical agents to print products by repeatedly depositing thin layers of materials bonded together, layer by layer. It is used in aerospace, automotive, medical and consumer product fields, among many other industries. The technology emerged about 25 years ago but only entered the mainstream in the past year or so as 3D Systems and Stratasys began to plumb the consumer market, and as both stocks became a hot topic.

Different Strategy

All along, ExOne was plotting a different strategy. In an interview with IBD in late February, CEO Kent Rockwell said what sets ExOne apart is that it uses a wider range of materials to print products. These materials provide the ability for ExOne printers to make production-grade objects and castings out of stainless steel, bronze and glass, silica sand and ceramics. ExOne focuses primarily on printers for large industrial companies with big capital spending budgets, such as aerospace, automotive, heavy equipment, and liquid and gas transmission.

Its 3D printing technology was developed more than 15 years ago by researchers at MIT. The company, originally known as Extrude Home, became ExOne in 2005. The company makes four different types of 3D printers, ranging in price from about $1.4 million to $100,000 each. It also sells supplies and associated products needed for 3D printing, in addition to providing services, training and technical support.

The company reported revenue of $28.6 million in 2012, up 88%, with a net loss of $10.2 million, or 77 cents per share. Sales of 3D printers accounted for 55% of sales. Printing parts, materials and other services accounted for the remaining 45%.

It was not until the fourth quarter that ExOne posted its first profit . In the fourth quarter of 2012 ExOne reported revenue of $12.7 million, about $400,000 above consensus estimates and up 370% from $2.7 million reported in the year-ago quarter. Net income was $900,000, or 7 cents a share.

The company is scheduled to announce first-quarter results Tuesday after the close of regular trading. Few analysts currently follow the company. Thomson Reuters lists three. The consensus estimate for ExOne revenue in the first quarter is $9 million, up 70% from the first quarter a year ago. Estimates on earnings per share, minus items, are an 11-cent loss, better than the 28-cent loss a year ago. Purchases of 3D printers typically follow a seasonal pattern, generally higher in the third and fourth quarters.

The company is in various stages of qualifying additional materials for printing, such as titanium, tungsten carbide, aluminum and magnesium. On April 30 ExOne opened an R&D lab in St. Clairsville, Ohio, which will focus on the application of new printing materials and machines.

While the technology is most often referred to as 3D printing, the common industry term is "additive manufacturing." ExOne, in its 10K annual report filing with the SEC on Dec. 31, said "We believe that we are an early entrant into the additive manufacturing industrial products market and one of the few providers of printing solutions to industrial customers."

A primary use of ExOne printers is to make product prototypes. But as its customers become more acquainted with the technology, they can advance to full product runs.

ExOne says its technology gives manufacturers the freedom to produce objects with virtually unlimited design complexity. It says production scale is irrelevant and lot quantities of one are just as efficient as lot quantities of 1,000.

Laser Sintering

Its primary competitors do not make 3D printers. Rather they use a laser-based metals printing process, also called laser sintering or laser fusing. Like ExOne, they start with powders but fuse the materials with high-energy lasers. The largest companies in this field are Germany-based EOS, Germany-based Concept Lasers, and Swedenbased Arcam.

Analyst Lewis, here again, thinks ExOne is not seriously threatened by these competitors. While the laser-based systems can achieve very fine feature detail they are more expensive, he said.

"The laser-based systems are good for very high-value, low-volume, finely featured products," he said. The 3D printers do not achieve the same degree of precision as laser sintering but are faster and better suited for higher volume.

"We think ExOne is in a faster-growing niche," said Lewis. "We believe that 2013 will represent the first year of positive earnings for ExOne and that growth will ensue from there."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: DDD , SSYS , XONE

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