Stratasys 3-D printer company sees path to future even with stiffer competition

Stratasys, a 30-year old pioneer in the 3-D printing industry, is in a new chapter.

After its annual revenue has barely grown in the past five or six years, it is facing a range of new competition from established printing companies, startups backed by private equity firms and others going public through deals with shell or holding companies.

At the same time, the company jointly headquartered in Eden Prairie and Israel sees a clear path to growth and feels now is the opportunity. The market is there, and the technology is no longer emerging, it's good enough for the next phase, said Yoav Zeif, the company's chief executive.

"Digital manufacturing is a distributed way of manufacturing. The world is changing and the need is there," said Zeif in an interview in July at the company's Eden Prairie manufacturing plant. "The need is there because of supply chain issues, the need to customize and the need to produce in proximity to the end customer."

Stratasys reports its second quarter results on Thursday, and analysts are expecting the company to report revenue of $136.1 million, which would be a 16% increase over the second quarter of 2020 but only a 1.4% sequential improvement over the first quarter of 2021.

Stratasys has upped its offerings of printers in the past year, introducing seven new models that it says makes it the industry leader in 3-D polymer printing. The lineup includes some new technologies as well as machines designed for medical and dental markets.

Some of Stratasys' competitors have created machines that print in metal, but the company is committed to creating machines and technologies that use polymers because its leaders believe that has the largest future potential for digital on-demand production.

"We have a very clear strategy, in a nutshell polymer manufacturing," said Zeif, who splits his time between Minnesota and Israel.

Another avenue for growth is building up the services side. Company engineers demonstrated those capabilities at their Stratasys Direct Manufacturing facility in Eden Prairie, which has rows of their 3-D printers available for mass printing of production ready parts.

On display were also the latest models of their printers used to demonstrate their full capabilities in medical and dental applications.

Machines for the medical market can print in full-color with varying densities giving doctors realistic models for use in demonstration but also training and surgical practice before a patient operation.

Justin Miller, vice president and investment manager at St. Paul-based Mairs & Power, said he likes Stratasys' strategy of remaining more focused on the polymer manufacturing. Its technology is more suited than that, said Miller, who follows Stratasys but whose firm does not hold a position in Stratasys.

The competition in the 3-D space is only getting stiffer.

"A significant amount of capital has floated to that industry," he said. "Even though the growth industrywide has been really impressive the competitive dynamics have been really, really brutal."

Competitors include established 3D printer manufacturers like publicly traded companies 3D Systems based in Rock Hill, S.C., and Markforged Holding Corp., based in Watertown, Mass. and the venture capital backed Carbon Inc. based in Redwood City, Calif. There is also competition from traditional printer companies like HP Inc.

At the outset, 3-D printers were aimed at engineers and developers looking to quickly make and iterate product prototypes. A growing focus is on the service side that specializes in mass printing of parts that are used in actual production.

On July 16, an on demand digital manufacturing company that uses some Stratays 3-D printers, Fathom Digital Manufacturing based in Hartland, Wis., announced it was going public through a business combination with the special purpose acquisition company Altimar Acquisition Corp. II that is sponsored by alternative asset management firm HPS Investment Partners.

The technology is competitive in terms of the economics to produce hundreds, thousands, and tens of thousands of parts for use in production with 3D printing. Now it can compete on price, quality, and speed with the economics of creating new molds and production lines.

One of the new machines, the Stratasys F770, has one of largest build platforms in the industry.