San Francisco — For Stratasys Ltd., the recent acquisition of Origin Inc. expands the company's reach in the 3D printing market.
For Origin Inc., a move into a larger organization provides some financial muscle and global reach to help expand its technology.
The $100 million cash-and-stock deal closed in January, joining Origin's Programmable PhotoPolymerization, or P3, technology into Stratasys' existing portfolio of 3D printing offerings.
Stratasys, based in Rehovot, Israel, expects to add up to $200 million in annual revenue within five years by acquiring the P3 technology as part of the deal.
The acquisition will "fortify" Stratasys' position serving segments such as dental, medical, tooling, industrial, defense and consumer goods, the company said.
"This is an important step in advancing our strategy to lead in polymer 3D printing by expanding into mass produced production volume, the fastest growing segment of the 3D printing industry," CEO Yoav Zeif said in a conference call to discuss the transaction.
The acquisition brings together a long-term player in 3D printing and a fairly new business. Stratasys has more than three decades in the business, while Origin came on the scene in 2015.
Origin's P3 technology cures liquid photopolymer resin using light. The company's Origin One 3D printer controls light, heat and force to build parts with accuracy and consistency, and can use different commercial grade durable resins, the company said.
"We believe that combining Origin's innovative technology with our industry's best global footprint will help drive our leadership position in polymer additive manufacturing," Zeif said.
Origin will remain headquartered in San Francisco and retain staff as part of Stratasys.
"All of us at Origin are so enthusiastic about combining forces," Origin CEO Chris Prucha said during the conference call. "It's really a great opportunity to accelerate the impact our platforms have on the additive manufacturing industry.
"This is a perfect time for us to join up with Stratasys. We've worked incredibly hard to fine-tune our platform with our early units and customers. And we already have Origin One systems installed at customer sites across nine countries," he said. "It's time to scale that effort with Stratasys' incredible, global go-to-market resources."
Origin started shipping its units to customers in 2019 and ramped up delivery last year. Despite the challenges of COVID-19, Prucha said his company was not forced to seek a partner due to any financial problems.
"We've been able to ship a substantial number of Origin One systems," he said. "That has actually kept our cash flow relatively stable through this entire year (2020).
"We really do see this combination as allowing us to really achieve our vision and getting that install base globally with Stratasys," he said.
Origin had options regarding deal-making as other companies also approached the firm, but it felt joining Stratasys was the best option. "Not only for Origin, but we believe it will be the best outcome for our partners and our customers as well," Prucha said.
Origin is receiving $60 million initially, including $35 million in cash and $25 million in Stratasys stock. The remaining $40 million will be based on performance over the next three years, including approximately $20 million in cash and the remainder in stock, Stratasys Chief Financial Officer Lilach Payorski said.
"I think the most important thing is we're able to leverage Stratasys' global go-to-market infrastructure and expertise. But we're still here in San Francisco. And our team is staying together. I think that's incredibly important in terms of the post-merger integration," Prucha said.
Being part of the larger Stratasys organization will allow Origin to focus on technology development instead of dividing time with other responsibilities of running a stand-alone business.
"That will accelerate the rate of work that we're doing," Prucha said.
While acquiring San Francisco-based Origin will accelerate the growth rate of Stratasys, the company expects the move will be slightly dilutive to non-GAAP earnings this year. The move turns accretive to non-GAAP earnings by 2023.