April 10, 2013 / 4:06 PM / in 5 years

3D printer maker ExOne eyes 50 percent gross margin

(Reuters) - ExOne Co (XONE.O), the 3D printer maker that went public in February, expects its gross margin to exceed 50 percent within three years, catching up with those of its main competitors, the company’s chief executive said.

ExOne, which has a market value of about $400 million, plans this year to open three production service centers (PSCs) as part of its expansion into the emerging markets of South America and Asia.

Chief Executive Kent Rockwell told Reuters in an interview that the company was aiming to raise its annual revenue to $100 million within three years. ExOne reported revenue of $28.7 million in 2012.

“If we get to the $100 million level of activity (annual revenue), we should probably by that time be able to sustain the 50 percent margin level,” he said.

In terms of gross margin, that would bring ExOne, which has forecast its 2013 gross margin of 42 percent to 46 percent on revenue of $48 million to $52 million, closer to its peers 3D Systems Corp (DDD.N) and Stratasys Ltd (SSYS.O).

Both 3D Systems and Stratasys reported gross margins of 51.2 percent in 2012.

U.S. President Barack Obama, in his State of the Union address in February, cited 3D printing technology as having "the potential to revolutionize the way we make almost everything".(link.reuters.com/fuw85t)

The technology creates solid objects from a digital model by laying down successive thin layers of material. ExOne counts BMW AG (BMWG.DE), Ford Motor Co (F.N), Caterpillar Inc (CAT.N) and Boeing Co (BA.N) among its industrial customers.

As leading-edge 3D printers find new roles in manufacturing, for example creating product prototypes, shares have rallied.

ExOne’s stock has risen 72 percent since it placed shares on the Nasdaq at $18.00 on February 7. Its shares were up 4 percent at $32.14 on Wednesday.

Three analysts tracking the company have their highest ratings on the stock; two of them have a price target of $40, according to Thomson Reuters data. The third analyst has a $35 price target.

BB&T Capital Markets analyst Holden Lewis said he expected the company’s gross margin to reach 50 percent, although it might take a little longer than the company has forecast.

“Three to five years is reasonable,” he said. “I see a 50 percent-plus type of margin as something that they can achieve, but it’s going to be achieved by the PSC network overall.”

ExOne plans to set up three PSCs this year, said Rockwell, one more than it announced during fourth-quarter earnings.


The company’s five PSCs in the United States, Germany and Japan, which sell 3D printed parts and materials, contributed 45 percent of its revenue last year.

    “We’ll put one more PSC in the U.S. in the second half this year. We are (also) going to put a second one in Japan,” said Rockwell. The third new PSC, he said, would be in South America.

    “We are contemplating going to South America with a PSC this year. The demand is obviously there,” said Rockwell, who is also founder and chief executive of Rockwell Venture Capital. He did not identify a specific country in South America.

    The company also plans to expand further in Asia, which accounted for 30 percent of revenue last year. As well as Japan, the company has sold its products in China, Taiwan and India, said Rockwell.

    ExOne was founded in 2005 as a spinoff of Extrude Hone Corp. Its machines, which cost anything between $100,000 and $1.5 million, can print on diverse materials including stainless steel, bronze, glass, silica sand and ceramics.

    Rockwell said he expected the company to add at least three new materials and get seven or eight materials certified to industrial standard over the next three years.

    Lewis, the BB&T Capital Markets analyst, said: “You can well imagine that, if you couldn’t print aluminum and now you do, that’s going to open up a whole range of possibilities.”

    But while some 3D printer makers have adapted an evolving technology used by manufacturers for more than two decades toward consumers -- offering the prospect of producing everything from toys to tools -- Rockwell has no plans to follow suit.

    He said ExOne was not considering entering the consumer printer business for now.

    “Right now, we are much smarter just staying focused on the industrial markets we are in, and the new materials we want to be producing,” he said.

    Editing by Robin Paxton and Don Sebastian

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