Top Deal Reiterated: A Revolutionary Alternative to Product Modeling

Key Stats:

Summary

In September of 2018, WhiteClouds was rated a Top Deal by KingsCrowd. As a reminder, WhiteClouds is a 3D printing as a service solution that enables organizations to easily order both prototype products as well as consumer products with no in-house design or 3D printing expertise.

With rapid delivery on high-end customized color parts both big and small, the team has found an ability to service multiple verticals with beautiful end-products.

At the time we rated the company a Top Deal because of its strong market traction, long term defensible moat in a growing industry, and proven management team including CEO Jerry Ropelato, who built a $100M business prior,.

With the team back for another raise, we are analyzing the business to determine if it warrants continued investment.

Business Model Refresher

As a reminder, WhiteClouds provides 3D printing as a service in its 60,000 square foot printing facility. Their 3D printers can print in full color with extreme precision, capable of printing details as small as 16 microns, or ⅙ the size of a human hair. With over 70 production printers, WhiteClouds is capable of producing a large variety of prints in many different sizes, enabling them to help any company with their needs.

They produce their 3D prints on demand, and often times the company can complete orders within a day, producing thousands of individually customized products every month.

The global 3D printing market is estimated to be a $30B+ global market opportunity by 2023, up from $7.9B in 2016 driven by an improvement in the end products produced by 3D printers to be utilized in more consumer interfacing applications.

Business Updates

1. Healthy Top Line Growth: When we last rated the company in 2018, White Clouds had stated 2017 revenues of $2.29M. With 2018 closed out the team reported ~$3.5M in fiscal year revenues, a 53% CAGR in top line growth, after having discontinued less profitable lines of business in 2017.With strong growth from a portfolio of customers that includes the likes of Google, IBM, Amgen, Harley Davidson and more, it is apparent that White Clouds is building a strong book of business driven by its position in the market as a large and versatile 3D print provider. Source: Company material
2. Improving Underlying Business Fundamentals: Having discontinued less profitable lines of business in 2017 led to a gross margin of 66% in 2018 versus 53% in 2017 and the team expects to elevate that to 69% during 2019.Part of the improvement in bottom line cost comes from the $496 customer acquisition cost in relation to $21,578 in customer lifetime value with a 98% retention rate. Many of the efforts put in place by the team around SEO (search engine optimization), which you may remember is a core competency of this team, are taking hold. Normalizing the company’s financials for past acquisitions and capital investments reveals a company with a strong, and thus far successful, plan for growth on a trajectory heading toward profitability in the next few years.
3. Large Entity Customer Acquisition: WhiteClouds continues to gain a foothold with large corporate customers. Across its portfolio of customers, it has built a strong presence in healthcare, event-planning, and consumer retail companies.Currently, the company has 70+ Fortune 1000 companies, 38 of which were acquired in 2018 alone. These Fortune 1000 companies include very diverse brands like American Express, NASA, Amazon, Disney, and Google. WhiteClouds’ acquisition of Fortune 1000 customers indicates their ability to serve large clients with trusted quality products.
   As that list continues to grow the network effects of being known as the trusted provider of 3D printed products will help separate WhiteClouds from other potential competitors.

Rating

WhiteClouds continues to show signs of being a Top Deal. When we last rated the company in 2017, the team was raising at a $20M valuation cap. Today, that stands at $22M on meaningfully improved revenues and gross margins.

 This experienced management team continues to execute and build a healthy business that has a growing list of Fortune 1000 companies that are proving to be high repeat business customers.

As we stated in our prior rating, if the team continues to build the business in the way it has shown to date, acquisition opportunities in the $150M to $175M range could be within reach in the next 3 to 5 years with 3D printing companies typically transacting in the 2 to 2.4X revenue multiple range.  

 The company’s customer acquisition cost to customer lifetime value clearly shows that marketing investments are likely to provide a high return on investment, and the company has also indicated that they plan on spending the majority of funds raised on sales and marketing.

An investment in WhiteClouds is effectively a stake in this new marketing push, and the margin between customer acquisition cost and customer lifetime value, as well as the potential growth in their various market segments. With the company’s current growth trajectory and their high-value product offering, WhiteClouds is a uniquely promising investment. If interested, be sure to invest HERE.