The ExOne Company (NASDAQ:XONE)

CAPS Rating: 3 out of 5

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Player Avatar Dima (97.08) Submitted: 2/14/2013 4:26:36 PM : Underperform Start Price: $27.25 XONE Score: -93.01

The stock just IPO'd and the 3D printing euphoria took it away! I think this is a great short here. Some details:

ExOne is a small company based in PA that just went public, surely trying to ride the 3D printing craze. They are a provider of 3D printing machines and printed products to industrial customers, announced terms for its IPO on Monday. The North Huntingdon, PA-based company plans to raise $75 million by offering 5 million shares at a price range of $14 to $16. At the midpoint of the proposed range, ExOne would command a fully diluted market value of $192 million. ExOne, which was founded in 2003 and booked $19 million in sales for the 12 months ended 9/30/2012, plans to list on the NASDAQ under the symbol XONE.

At the IPO price, they were selling at 10+ times sales. At the current price 80% higher, that number is at 20x sales. The company is not profitable. In fact, their loses keep growing year over year. From the company's IPO filing:

"We incurred a net loss of approximately $5.2 million and $7.6 million for the years ended December 31, 2010 and 2011, respectively, and had an accumulated deficit of approximately $15.6 million as of December 31, 2011. As shown in the accompanying unaudited condensed consolidated financial statements, we incurred a net loss of approximately $10.7 million for the nine months ended September 30, 2012, and had a working capital deficit of approximately $7.3 million. These conditions raise substantial doubt as to our ability to continue as a going concern. We believe that we will be able to raise additional equity or debt financing sufficient to support our ongoing operations either in connection with this offering or otherwise. However, we can give no assurance that profitable operations or sufficient cash flows will occur in the future."

They have a very concentrated customer base and are not shy about it. Again, from the IPO filing:

"During the nine months ended September 30, 2011 and 2012 and the twelve months ended December 31, 2010 and 2011, we conducted a significant portion of our business with a limited number of customers. Our top five customers represented approximately 46% and 42% of total revenue for the nine months ended September 30, 2011 and 2012, respectively, and approximately 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 our 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. Timing of customer purchases is dependent on the customer’s capital budgeting cycle, which may vary from period to period. The nature of the revenue from 3D printing machines, as described above, does not leave us dependent upon a single or a limited number of customers. Rather, the timing of the sales can have a material effect on period to period financial results."

It seems like the primary reason for going public is to enrich the CEO, who also happens to be the primary company's creditor. He has extended the company a line of credit that will be paid off from the proceeds of this IPO (can you say conflict of interest?):

"We estimate that the net proceeds to us from this offering, after deducting underwriters’ discounts and commissions and our estimated offering expenses, will be approximately $68.3 million. We intend to use the net proceeds from this offering to invest in further improving the efficiency and capacity of our machines and expanding the number of materials from which we can make products, to increase the number of locations of our PSCs and for working capital and other general corporate purposes. We will also use approximately $9.8 million of the net proceeds to repay a revolving line of credit that we have with RFP, an entity controlled by our CEO , and approximately $3.0 million to purchase the business of TMF and Lone Star, our variable interest entities. We will not receive any proceeds from the sale of common stock by the selling stockholder."

Lots of red flags here. I am certain there will be a lot more equity dilution coming down the road at much lower prices.

Here's the IPO filing: http://www.sec.gov/Archives/edgar/data/1561627/000119312513024839/d461168ds1a.htm

Company website: http://www.exone.com/

Report this Post 3 Replies
Member Avatar Volke (71.69) Submitted: 4/3/2013 12:59:16 AM
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FB deja vu

Member Avatar Heisenbergo (33.07) Submitted: 5/1/2013 6:29:49 PM
Recs: 2

They have rather unique products with metal and sand printers and a huge potential market, especially if the capabilities of their printers further improve. So I kinda like the fact that they only have 5 customers that give almost half the revenue. Imagine how much space to grow that that leaves them.

Member Avatar kankemike (54.82) Submitted: 6/28/2013 5:39:52 PM
Recs: 0

The XONE is not an internet play (Volke - FB?). I don't like that comparison b/c XONE actually does make something. XONE will continue to outperform due to their ability to print real products (metal). Once GE, F, GM, CAT, OII, RIG and all others find out they can save money by investing in printers and not warehouses, you better hope you have some in your ROTH IRA.

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