CONFIDENTIAL
3D Print Me an Investment Banker M&A and Financing Trends in 3D Printing
Bryan Dow Executive Director, Investment Banking April 16, 2015
CONFIDENTIAL
Senior member of Mooreland Partners Industrial Technology Group spearheading 3D Printing efforts
Advise companies in mergers, acquisitions, sales and raising growth capital
Based in Silicon Valley
Over 10 years of investment banking experience
– Previously Head of the Clean Energy and Industrial Technology Investment Banking Group at ThinkEquity
– Prior to ThinkEquity, member of the Technology Investment Banking Group at Needham & Company
– Completed over 50 transactions BS from the Leavey School of Business at Santa Clara
University
Bryan Dow Executive Director Investment Banking
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CONFIDENTIAL 3
0%
100%
200%
300%
400%
500%
600%
700%
2012 2013 2014 2015
3D Printing Stocks Tumble!
“Stocks fell sharply today on predictions of speculation of rumors of negative indicators!”
CONFIDENTIAL
3D Printing Market Overview
M&A Trends
Financing Trends
Public Markets and Valuations
Conclusion
Agenda
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3D Printing Market Overview
CONFIDENTIAL
Mooreland 3D Printing Universe: Systems and Service Bureaus
Production (End-Use)
Serv
ice
Bure
aus
Prin
ter M
anuf
actu
rers
Co
mbo
*
Production/ Professional
Professional (Prototypes/Models)
Professional/ Personal
Personal (Hobbyist Products)
Production
Source: Mooreland Partners. *Combo companies act as both service bureaus and 3D printer manufacturers.
/ /
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Production
/
/
/
Production
/
/
/ / /
Production
/
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Mooreland 3D Printing Universe: Applications and Enablement
Source: Mooreland Partners.
/ /
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/
Other
Software
CAD Tools & Services
Freeform Modeling Tools /
Sculpting Tools
Applications 3D Scanners Components / Materials
/
/
/
CONFIDENTIAL
From 2011 to today, 3D Printing companies have raised close to $4Bn in public offerings vs. ~$300M raised in the 23 years from 1987 to 2010
In 2013 the level of venture capital investments into 3D printing tripled from 2012
Annual industrial printer purchases has increased nearly 19x since 19951
# of companies exploding in recent years…
History of 3D Printing
# 3D Printing Companies Over Time (that we know of)
Systems Sold in 19951
Systems Sold in 20141
1) Source: Wohler’s 2014
~9,832 systems sold ($1.1Bn)
525 systems ($124K)
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
Maker- Jet 3D!
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41
93
200-600
1985 1995 2005 2014
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CONFIDENTIAL
Selected Recent Market Developments
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HP Multi Jet FusionTM (Oct. 2014)
Ricoh RapidFab (Sep. 2014)
Arburg FreeFormer (Oct. 2014)
Alcoa Acquires RTI (Mar. 2015)
Out of Segment Leaders Building Additive Capabilities
CONFIDENTIAL
Selected Recent Market Developments (cont’d)
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CLIP Technology (Mar. 2015)
3D Printed Electronics
Highly-Discussed Technology Advances
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Selected Recent Market Developments (cont’d)
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Ongoing Advanced Around Human Body Applications
Key M&A Trends
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18
12
7
11
6
3
2015YTD201420132012201120102009
Selected Recent Noteworthy Transactions
2011 2012 2013 2014 2015
Deal volume accelerating – 2015 deal activity on pace to be
the most active – Yet, some 3D Printing companies
curtailing acquisition binge, so need for new players to backfill
Deal size increasing in recent years
– Handful of landmark transactions in last 2 years
– All 6 deals with value at or above $100M taken place after Nov. 2011
Stratasys and 3D Systems continue to be the most active acquirers in the space by far…
– … However, as more 3D Printing companies accessing public financing and larger companies enter the sector, new acquirers are emerging
3D Printing Deal Volume Since 2009 3D Printing M&A by Type Since 2009
Source: CapitalIQ and Mooreland Partners. 1) Annualized as of April 2015
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1
Systems Manufacturer
Service Bureau
Software
Other
2015 Annualized Deal Count
CONFIDENTIAL
Who’s Buying??
`` # Deals (88 total) 62 14 4 3 2 2 1
# Deals YTD 2 2 1 - - - -
Cash on B/S $285 $443 $74 $37 $36 $60 $74
Types of Deals
Professional Equipment
Hobbyist Equipment
Service Bureaus
Software, etc.
Applications
Potential Out-of-Industry Buyers
Cash # Deals since 2012 M&A $’s Spent in 2014
Aggregate Values $194,763 573 $42,783
Leading 3D Printing Industry Participants
Source: Capital IQ as of April 2015.
$ values in millions
$ values in millions
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11.0x
5.9x 5.7x 5.5x
4.5x 4.5x 4.2x 3.9x 3.3x 3.1x 2.9x
2.4x 1.6x
0.9x
1 2 3 4 5 6 7 8 9 10 11 12 13 14
3D Printing M&A Valuations and Common Deal Structures
Source: Capital IQ, 451 Group, company reporting and Mooreland estimates.
Transaction structure is a key variable in 3D Printing M&A negations While many deals have published very high revenue multiples, transactions are often financed by richly valued stock vs. cash,
which may involve a significant lock up period and market risk of the shares Many deals also include a variety of contingency payments
– Earn-outs based on future performance – Incentive payments to retain key executives – Future payments contingent upon achieving certain integration goals
Select 3D Printing M&A Valuations: EV / LTM Revenue
(AP&C Division)
Median: 3.9x LTM Rev
Cash Stock Contingencies
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CONFIDENTIAL
Key Themes Observed in 3D Printing M&A
/
Aggressive service bureau acquisition, largely by equipment makers, as well as other service bureaus
Particularly active since Jan 2014 – 11 acquired
/ / / /
Notes Noteworthy Consolidations
Acquisition of specific capabilities such as mobile accessories, prosthetics, jewelry etc.
Likely area for future out-of-industry buyers (e.g. GE /Morris)
/
/ / Majority of 3DP deals (DDD & SSYS land grab)
While DDD has executed 5x the number of deals, SSYS has led a number of market defining transactions (e.g. MakerBot, Solid Concepts)
/ /
/ / /
Most commonly equipment manufacturers adding software to extend capabilities around managing scanned images
/
/
/
/
/
Expanding Service Bureau Platforms
Market Consolidation
Ancillary Capabilities
Application Specific
Acquisitions
/ / /
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/
/ / /
/
Financing Trends
CONFIDENTIAL
Tech Generalist VCs Formulated Strategy
Recently Active (1+) in
the Space
Recently Invested in the
Space
Private Investors in 3D Printing
Selected Current 3D Printing Investors
Explicit Strategy Around 3D Printing
Source: Mooreland Partners.
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Strategic Investors in 3D Printing
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Selected Venture Capital Investors and Portfolio Companies
Investor Targets Global 3D printing market grew 68% in 2014, generating $3.3B in revenue and interest from major tech investors
Source: Mooreland Partners and Venture Beat
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CONFIDENTIAL
Crowdfunding Successes
Name Campaign End Amount Raised
TIKO 3D Mar 15 $1.7M+
BoXZY Mar 15 $862K+
M3D LLC May 14 $2.9m+
Full Spectrum Laser Feb 14/ Sep 12 $1M+
3Doodler Jan 14 $2.3M+
Pirate 3DP Jun 13 $1.4M
While traditional VCs continue to invest in the 3D Printing space, start-ups have also found great success from crowdfunding platforms, such as Kickstarter and Indiegogo
Source: Manufacturing Disruption, Kickstarter, Indiegogo and Mooreland Partners (As of April 2015).
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Year # Campaigns
2012 18
2013 61
2014 68
2015YTD 25
Total Since 2012 157
Avg. $ Raised $178K
3DP Crowdfunding Deals since 2012 Selected 3DP Campaigns
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Who Has Raised Outside Capital?
Funded Crowd Funded Selected Bootstrapped Vast majority (>90%) of 3D Printing companies are still self-funded
Source: Mooreland Partners.
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CONFIDENTIAL
Investment Themes: VC’s Recently Interested in Applications and Enablement More Than Systems and Services Application-focused companies starting to attract Venture Capital investment above systems manufacturers and service bureaus
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Applications
Combining basic scanning technologies with 3D printing to offer custom fit products
Great expectations surrounding penetration of additive into orthopedic and custom molded medical equipment
Software, Scanners and Design Enablement
Some investors view equipment as potentially moving towards commodity, focused on lean business models that enable pro-sumer 3D printing
Investment interest in enabling technologies that accelerate adoption of 3D printing in a scalable software or e-commerce business model
Public Markets & Valuations
CONFIDENTIAL
~1.3x
8.3x
2.1x
~1.2x
14.3x 14.9x 14.8x
5.7x
$20M
$2M
$99M
$17M $29M
$14M
$30M
$99M
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$0
$2
$4
$6
$8
$10
$12
$14
$16
1 2 3 4 5 6 7 8
EV / Rev
LTM Rev
LTM Revenue and Valuation Multiples of IPOs
1987 1994 2012 2013 2014 1) 3D Systems multiple based on earliest available financials in September 2001; assumes Net Debt = 0 2) Arcam values from Nasdaq OMX relisting in 2012; previously traded on Nordic Growth Market
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CONFIDENTIAL
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
DDD SSYS XONE PRLB VJET SLM ARCM MATLS ARCW
Total Public Fundraisings
Source: Capital IQ. Excludes commercial debt and working capital lines.
Follow-on Offerings IPOs $4B+
Raised
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$ values in thousands
CONFIDENTIAL
-100%
0%
100%
200%
300%
400%
500%
600%
2012 2013 2014 20153D Printing Index Russell 2000 NASDAQ
Aggregate Public Stock Performance Since 2012 Since 2012, 3D Printing stocks have outperformed the Nasdaq by more than 2-to-1, despite severe correction in stock prices since early 2014
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Feb‘12 IPO
Jun‘12 IPO
Feb‘13 IPO
Oct‘13 IPO
May‘13 IPO
Jun‘13 IPO
+145% since
Jan. 12
-20% YTD
Source: Capital IQ, as of April 2, 2015.
CONFIDENTIAL 27
Public Markets Commentary: Continued Multiple Compression
Source: Capital IQ, as of April 2015
38.9x
8.9x
2.3x 1.9x
(5.0x)
-
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
40.0x
Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15
Month End EV / Revenue LTM Multiples
-43%
Group High Multiple
Group Low Multiple Median Multiple
CONFIDENTIAL
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
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SSYS and DDD NTM EV/Revenue has averaged 6.4x and 7.5x respectively over the last two years; now trading at 2.6x and 3.4x, respectively
Key drivers: underperforming Street expectations, company lowering guidance
Public Markets Commentary: Fundamental Market Factors
Source: Capital IQ, as of April 2015
Earnings Miss
Earnings & Organic Growth Miss
HP MultiJet
Street Analyst Lowers Earnings Estimate
Lowers Profit Forecast
-59% since
Jan. 14
CONFIDENTIAL 29
DDD and SSYS shares have also been pressured by speculative short sellers
Rising popularity of retail investors and hedge funds selling against “bubbles”
Since Jan. 1, 2014, the percentage of DDD and SSYS shares outstanding that have been sold short has increased 120% and 427% respectively
DDD is the 19th most heavily shorted stock on the NYSE1
Public Markets Commentary: Market Factors – Trading
Source: Capital IQ, as of April 2015 1) By short interest as a percentage of float
0%
5%
10%
15%
20%
25%
30%
35%
% S
/0 S
old
Shor
t
DDD - Short Interest as % of S/OSSYS - Short Interest as % of S/O
35%
21%
Comments % of S/O Sold Short Over Time
CONFIDENTIAL
7.3x
4.7x 4.7x 4.0x
3.5x 3.1x 2.6x 2.4x 1.6x
PRLB SLM DDD ARCM XONE SSYS VJET MTLS ARCW
9.2x
7.2x 6.7x
5.7x 4.5x
3.9x 3.4x
2.7x 1.8x
PRLB ARCM SLM VJET DDD XONE SSYS MTLS ARCW
Today’s 3D Printing Public Markets Valuations
Source: Capital IQ, as of April 13, 2015.
CY2015 Revenue Multiples
CY2014 Revenue Multiples
Median: 3.5x 2015P Rev
Median: 4.5x 2014A Rev
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Conclusion
CONFIDENTIAL
Valuations will continue to become more reasonable – Not necessarily by further declining stock prices, but companies growing into their valuations that
investors ascribe
Strategic and VC private investments to continue to ramp, but slowly – Strategics already developing strategies at the BU level, but this takes time to trickle down – VCs are more cautious in hardware investments in this environment; into capital light models
Limited IPO activity as certain “public ready” companies are waiting for the comp group to bounce back – Will provide more choices for public investors, which is good for the index – Increases buyer universe driving further M&A
More consolidation by existing players – Continued “land grab” for market share and defense reasons – Economies of scale and technical advancements are increasing quality and bringing costs down
Large conglomerates and 2D printer companies to enter via M&A – They have been on the sidelines for too long, starting to enter (i.e. HP, Arburg, etc.) – As the market becomes more established with customer qualifications, necessary market opportunity
will exist
What We Expect…
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CONFIDENTIAL
Bryan G. Dow Executive Director
950 Tower Lane, Suite 1950 Foster City, CA 94404 tel: +1 (650) 330-3788 [email protected]
Mooreland Partners LLC is a member of FINRA / SIPC
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SILICON VALLEY 950 Tower Lane, Suite 1950
Foster City, CA 94404 Tel: +1 (650) 330-3790
GREENWICH 537 Steamboat Road, Suite 200
Greenwich, CT 06830 Tel: +1 (203) 629-4400
LONDON 2-4 King Street,
London SW1Y 6QL Tel: +44 (0) 20 7484 1350
www.moorelandpartners.com