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ExOne Co (XONE): This 3-D Printer Stock Should Scare You

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Not all 3-D printer stocks should be created equal. ExOne Co (NASDAQ:XONE), the newest addition to the 3-D printer sector rocketed over 46% higher during its first day of trading. The IPO of this industrial 3-D printing company priced at $18, which was $2 above the expected $14-$16 range. ExOne raised about $90 million on the sale of 5 million shares, which should help grow its business. Before investors get excited about the growth prospect of industrial 3-D printers, they should be made aware of the sobering reality that ExOne’s business has barely left the gate.

ExOne Co (NASDAQ:XONE)They sold how many?
For a company that’s in the business of selling 3-D printers, unit sales are great way for investors gauge interest of its products. During the first nine months of 2012, ExOne sold a whopping five, yes five printers. For all of 2010 and 2011, the company sold a total of four printers each year. Not only is this an absurdly low number, the rate at which ExOne can produce printers appears to be painstakingly slow. The company shipped seven printer units during the fourth quarter of 2012, yet only sold five printers in the first nine months of 2012, indicating that some of these printers were ordered in 2011. Naturally, the company believes that this increase in shipment volume is a strong indication of acceptance for its technology in the marketplace. At the end of 2012, ExOne had six additional printer units in its backlog, which is expected to bring in an additional $7.8 million in revenue. Each printer in this backlog has a price tag between $800 thousand and $1.4 million.

An emerging growth company
Since ExOne’s inception, the company has not generated operating profits. For the first nine months of 2012, the company earned $15.9 million in revenue, a 27% increase over the first nine months of 2011. During the 2012 period, the company lost $11.1 million, prior to adjusting for a $7.7 million expense related to equity based compensation. On a per-share basis, this lost amounted to $1.21 during the first, which compares unfavorably to the first nine months of 2011, when the company lost $0.53 a share.

Segment breakdown:

Segment Full-Year 2010 Percentage of Total Full-Year 2011 Percentage of Total
Services $7.8 58% $9.9 65%
Printers $5.6 42% $5.4 35%
Total $13.4 100% $15.3 100%

Source: ExOne preliminary prospectus. All dollar figures in millions.

Given the high cost structure of the company’s high-end industrial printers, it’s not surprising to see customers opting to utilize ExOne’s manufacturing services over taking delivery of a printer. In this context, ExOne is currently more of a specialized manufacturer that’s hired for jobs than it is a 3-D printing purveyor. Well aware of this fact, the company is planning to open 10 more of its production service centers by 2015, bringing the total number to 15.

A-list customers
For its size, ExOne’s customer list is quite impressive, which includes  high profile companies like Caterpillar Inc. (NYSE:CAT), Ford Motor Company (NYSE:F), The Boeing Company (NYSE:BA), BMW, Tesla Motors Inc (NASDAQ:TSLA), Deere & Company (NYSE:DE), and ITT Corp (NYSE:ITT). In other words, ExOne appears well-known within the industries where it’s currently seeking new growth, and could potentially be problematic for its expansion plans. Naturally, the company’s revenues were concentrated between the aerospace, automotive, heavy equipment, and the energy industry, further putting the company at risk to industry disruptions.

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