Desktop Metal Nabs EnvisionTEC for $300 Million to Take on Carbon, Stratasys, 3D Systems, HP, and More

Desktop Metal (DM) has signed a definitive agreement to acquire EnvisionTEC—a leading provider of volume production photopolymer 3D printing solutions for end-use parts—for a total consideration of US$300 million. The transaction expands DM’s total addressable market to include the more developed market for production polymer Additive Manufacturing (AM) in addition to the broad array of verticals and applications that use area-wide 3D printing in mass production volumes. It also gives DM access to core Intellectual Property (IP) for the Digital Light Processing (DLP) AM technology family (e.g., Carbon, Origin), enhanced distribution and go-to-market capability, plus an entry into Robotic Additive Manufacturing (RAM).

EnvisionTEC, which will operate as a wholly owned subsidiary of DM, has been self-reliant with no outside capital since its founding in 2002. It counts more than 5,000 customers, including more than 1,000 in dental and others across medical (biofabrication, medical devices), professional (jewelry, entertainment, education), and industrial (automotive, aerospace, product) end markets. The company offers four major photopolymer product lines that span chairside dental work (D4K Pro) to industrial mass production (Xtreme 8K) and has qualified more than 190 materials, including multi-cure resins with material properties that are in line with or exceed thermoplastics. More than 10 million parts were printed on EnvisionTEC systems in 2020.

Motivating and strategic rationale behind the acquisition includes the following items.

• IP: EnvisionTEC is the original inventor of DLP 3D printing technology, putting it in the same ecosystem as fast-growing startups Carbon and Origin (which was recently picked up by Stratasys). In part due to EnvisionTEC’s market tenure, the company has built a massive material catalogue that investors can view as a technical moat protecting its position.
• One-Stop Shop: The addition of EnvisionTEC gives DM an arsenal that includes metal, composites, and now polymers. This broadens the potential for cross-sell and upsell opportunities for a range of customers who work with products with different material properties in various stages of production. What remains to be seen is the extent to which DM and EnvisionTEC can standardize and unify their portfolio across software, data, and design.
• Scale: EnvisionTEC has raised no outside capital yet has a solid lineup of market-ready solutions. DM has raised considerable capital with far fewer SKUs by comparison and less time in market. Putting EnvisionTEC under the wing of DM gives the target a new set of boots on the ground to more aggressively expand and support distribution and go-to-market activities. The benefit to DM is a new technology suite and broader market appeal, plus the growth of its distribution network from 80 partners to more than 200, including strong vertically focused partners in medical, jewelry, and dental. Combined geographic sales and service coverage now stands at 68 countries versus 60 for DM before the transaction.
• Technology Transfer: DM’s Single Pass Jetting (SPJ) technology can be used in conjunction with EnvisionTEC’s RAM solutions. Currently EnvisionTEC uses a binder jetting print head attached to an ABB robot arm to print sand molds, mold cores, and investment-casting patterns for foundry applications. The belief is that DM can dramatically improve this solution set with its SPJ technology and consequently take share from other providers like ExOne.

The bar for AM 2.0 polymer applications is high because alternatives like injection molding are commonplace. In addition, for manufacturers to buy-in requires a set of qualities that are the same or better than thermoplastics, which is the gold standard for polymer part production. This includes parity or improvement in terms of cost and speed, accuracy, strength, and surface finish.

DM has already started to branch out from metals with the release of its Fiber system; however, the company’s new designation as a public entity means there is even more of an impetus to demonstrate market traction (e.g., sales, revenue growth). EnvisionTEC’s flagship products—the Xtreme 8K DLP (starting at US$150,000) and Envision One (starting at US$17,900)—will be a big help to meet these ends. Compared to Carbon’s L1 platform, the Xtreme 8K DLP is 20% cheaper (based on a three-year subscription) and offers superior price performance thanks to a roughly 80% larger build area. Further, the Xtreme 8K DLP is half the cost of HP’s MJF 5200 and is far superior in terms of speed, build box volume, and the number of materials in the material library. The Envision One and Envision One HT (high temperature) are most comparable with the Carbon M2 and Origin One, although EnvisionTEC has a slight price advantage.

In terms of driving sales revenue, the unit economics EnvisionTEC brings to the DM bench is attractive. A typical Xtreme 8K printer sale is expected to net the company US$112,000 net of channel margin. Assuming a seven-year lifespan for the machine, DM factors an additional US$1.5 million in consumables and extended warrant revenue, meaning a US$1.6 million revenue opportunity per printer with a seven-year lifetime value that is 14 times the upfront revenue. Gross profit per printer over seven years is estimated to be US$809,000, or more than 50% of cumulative gross margin. The market will ultimately get a more precise view on the financial impact of the acquisition on February 15, 2021, when DM, which went public through a special purpose acquisition company, will provide financial results for the first time.