Bryan dow inside3 dp conference ny - mooreland presentation apr 2015
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Bryan Dow, an executive director at Mooreland Partners, provided an overview of trends in the 3D printing industry. He discussed the growing market size and number of companies. Dow also summarized recent M&A activity, noting increasing deal volumes and sizes. Financing trends included strong venture capital interest and some successful crowdfunding campaigns. Regarding public markets, Dow observed the large amounts raised but recent stock price declines and multiple compression. He concluded valuations may stabilize as companies grow into their values and private investments continue growing.
Bryan dow inside3 dp conference ny - mooreland presentation apr 2015
- 1. CONFIDENTIAL 3D Print Me an Investment Banker M&A and Financing Trends in 3D Printing Bryan Dow Executive Director, Investment Banking April 16, 2015
- 2. 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 2
- 3. 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!”
- 4. CONFIDENTIAL 3D Printing Market Overview M&A Trends Financing Trends Public Markets and Valuations Conclusion Agenda 4
- 5. 3D Printing Market Overview
- 6. CONFIDENTIAL Mooreland 3D Printing Universe: Systems and Service Bureaus Production (End-Use) ServiceBureausPrinterManufacturersCombo* 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. / / 6 Production / / / Production / / // / Production /
- 7. CONFIDENTIAL Mooreland 3D Printing Universe: Applications and Enablement Source: Mooreland Partners. / / 7 / Other Software CAD Tools & Services Freeform Modeling Tools / Sculpting Tools Applications 3D Scanners Components / Materials / / /
- 8. 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! 3 41 93 200-600 1985 1995 2005 2014 8
- 9. CONFIDENTIAL Selected Recent Market Developments 9 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
- 10. CONFIDENTIAL Selected Recent Market Developments (cont’d) 10 CLIP Technology (Mar. 2015) 3D Printed Electronics Highly-Discussed Technology Advances
- 11. CONFIDENTIAL Selected Recent Market Developments (cont’d) 11 Ongoing Advanced Around Human Body Applications
- 12. Key M&A Trends
- 13. CONFIDENTIAL 32 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 13 1 Systems Manufacturer Service Bureau Software Other 2015 Annualized Deal Count
- 14. 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 14
- 15. CONFIDENTIAL 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 15
- 16. 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 / / / 16 / / / / /
- 17. Financing Trends
- 18. 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. 18 Strategic Investors in 3D Printing
- 19. CONFIDENTIAL 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 19
- 20. 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). 20 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
- 21. CONFIDENTIAL Who Has Raised Outside Capital? Funded Crowd FundedSelected Bootstrapped Vast majority (>90%) of 3D Printing companies are still self-funded Source: Mooreland Partners. 21
- 22. 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 22 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
- 23. Public Markets & Valuations
- 24. 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 24
- 25. 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 25 $ values in thousands
- 26. CONFIDENTIAL -100% 0% 100% 200% 300% 400% 500% 600% 2012 2013 2014 2015 3D 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 26 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.
- 27. 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
- 28. CONFIDENTIAL -70% -60% -50% -40% -30% -20% -10% 0% 10% 28 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
- 29. 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/0SoldShort DDD - Short Interest as % of S/O SSYS - Short Interest as % of S/O 35% 21% Comments % of S/O Sold Short Over Time
- 30. 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 30
- 31. Conclusion
- 32. 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… 32
- 33. 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 33
- 34. 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