AL3 sells large scale modular 3D printing systems to industrial manufacturers. Its product, ARCEMY, provides a better solution to manufacturing parts for complex industrial machinery.
$0.160
Opened: 27-Jun-2024
Shares Held at Open: 6,777,530
What does AL3 do?
AML3D (ASX:AL3) is a technology company that specialises in robotic, automated 3D printing of metal parts that are delivered at the point-of-need - meaning the parts are made closest to where customers need them.
The parts that AL3 makes are made stronger, faster and more efficiently than conventional manufacturing processes.
What is the macro theme?
Additive Manufacturing, a form of 3D printing, is now a key pillar of the US strategy to build resilience into its manufacturing supply chain.
Additive manufacturing is a new way in which we believe complex industry product parts will be built as the countries move to localise strategic supply chains.
Compared to traditional casting and forging, additive manufacturing is harder, better, faster, stronger.
Our Big Bet for AL3
“AL3 re-rates to a $500M market cap on achieving significant sales growth across an expanding range of industries and jurisdictions”
NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our AL3 Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.
Why did we invest in AL3?
3D printing product at the forefront of manufacturing innovation
AL3 sells large scale modular 3D printing systems to industrial manufacturers. Its product, ARCEMY, provides a better solution to manufacturing parts for complex industrial machinery.
Blue-chip client base including US Department of Defence
AL3 has a range of high-profile customers including the US Navy, US Department of Defence, Austal (the Australian military shipbuilder) as well as oil & gas giants Chevron and Exxon. These customers provide validation for AL3’s product in future sales as well as a network of potential smaller suppliers for AL3 to target.
Tiny EV for AL3 with proven tech with sales
At 7.3c AL3 has a market cap of ~$22M, with ~$8M in the bank has an Enterprise Value of ~$14M. AL3 is already at ~A$6.6M in revenue for the first 9 months of FY24. AL3 has invested over ~$30M building out its tech.
New sales strategy already driving revenue growth
AL3 has moved from a “sell the 3D printed parts” to a “sell the 3D printing system” strategy. This new strategy means bigger contracts for AL3 and gives customers what they want because the parts are made closer to where they are needed.
“Sell the 3D printing system” strategy opens up yearly recurring revenue
For new orders of the ARCEMY system, AL3 will now build in ARCEMY services to include software and services fees on a recurring revenue basis. This includes software licensing fees, hardware maintenance, and tech support. This is an untapped stream of revenue for AL3 and a potential source of upside for the company as the company grows.
Strong US focus as AM Forward Program rolls out
In 2023 AL3 commenced its US focused strategy. The US spends more on its defence than the next 9 countries combined and as such is easily the most lucrative defence market jurisdiction to operate in. In 2022, the US has also launched the AM Forward Program to support 3D Printing across the industrial manufacturing sector. We think that the US is the right place for AL3 to grow its business.
US distribution partner Philips has proven its ability to sell AL3’s product
AL3 has a value added reseller agreement with ~$35BN capped Philips Corporation. Philips’s sales team has already helped AL3 make two US sales, including an ARCEMY sale to the US Navy Centre of Excellence which we see as the first signs that Philips is an engaged partner and we expect their sales team to help drive the marketing of AL3’s products.
US Navy to help to push AL3 to its parts suppliers
the early signs are there. We want to see AL3 expand into smaller US Navy parts suppliers who are following the US Navy’s lead. In September 2023, a Navy parts supplier called Laser Welding Solutions leased the ARCEMY product from AL3 - we hope the first of many contracts for AL3 from this type of smaller organisation.
What do we expect AL3 to deliver?
Objective #1: Hit $12M in revenue
According to the March quarterly AL3 will hit ~$7M revenue for FY24
We think that if they can back that up with beating $12M revenue in FY25 it would be a huge result.
Objective #2: More sales of ARCEMY
We want to see AL3 sign more large contracts via sales of their ARCEMY system (3D printing system).
AL3 already has good traction with the US Navy via the US Department of Defence and we alos want to see an expansion in jurisdictions and industries.
It also has a value added reseller agreement with ~$35BN capped Philips Corporation which has a large reach in the US
Milestones
total 8x new ARCEMY contracts
New ~$1M contract (New customer in US defense industry)
New ~$1M contract (Aerospace)
New ~$1M contract (O & G)
New ~$1M contract (New customer in non-US jurisdiction)
Objective #3: Prove recurring revenue from ARCEMY Services Deals
AL3 has built a recurring revenue component into its business model.
For each client that purchases the ARCEMY facility, AL3 has built in ongoing fees for providing ongoing support which includes software license fees of $150K a year, hardware maintenance fees of $50k a year, and tech support of $50k a year.
Milestones
Add new recurring revenue of $500K
Add new recurring revenue of $1M
Stretch target: Add new recurring revenue of $1.5M
Objective #4: More sales from manufacturing and prototype deals
In addition to the ARCEMY product, AL3 sells specific 3D printed parts to various organisations.
These sales contracts are generally smaller and proof of concept that will hopefully lead to repeat business.
Product testing and certifications expand the library of products that AL3 can sell in this way.
Milestones
5 new manufacturing / prototype deals
10 new manufacturing / prototype deals
New product certification 1
New product certification 2
What could go wrong?
Sales risk
There is always the possibility that AL3 does not close more sales, and its financial performance suffers as a result.
Partner risk
AL3’s value added reseller partner Phillips may not close additional sales, or may not be fully engaged, and as a result AL3 may struggle to increase its market penetration across the US defense industry or other jurisdictions and industries as quickly as we hope.
Funding and dilution risk
If AL3 is unable to sell enough of its products and services and move towards sustained profitability it may need to raise additional capital to sustain itself. This funding may be secured via a capital raise at a discount, and incur dilution to existing holders of AL3 shares.
Technology and Intellectual Property risk
AL3 will need to continue to improve its technology to retain its edge in the market. Additionally, it is possible that uptake of additive manufacturing may not occur at the necessary pace to deliver the growth we want to see. In terms of Intellectual Property (IP), AL3 has patents in many jurisdictions but AL3 may need to expand its patent portfolio and competing products may enter the market. While unlikely, there is also the possibility of industrial espionage.
Key personnel risk
AL3 is expanding in the US and will need to hire key personnel to drive this shift. Hiring processes could take longer than expected, or alternatively key personnel may leave the company.
Accreditation risk
The reputation of AML3D’s products and services is largely dependent on retaining Lloyd’s Register and ISO 9001 accreditation. The loss of these accreditations would significantly impact the demand for AML3D’s products and services.
Market risk
There is always a possibility that the broader market sells off dragging AL3 shares with it. Or alternatively there could be sector specific pain ahead for the tech industry, hurting companies like AL3.
What is our investment plan?
We plan to hold a position in AL3 for the next 3-5 years (and beyond) as it progresses its plan to gain significant market penetration in the large US market. We eventually may look to take some profits by selling up to ~20% of our holding (in line with our holding policy and escrow conditions) if the share price materially rerates on the company successfully delivering on the key objectives listed above.
Disclosure: Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 6,777,530 AL3 shares at the time of publishing this Investment Memo. The Company has been engaged by AL3 to share our commentary on the progress of our Investment in AL3 over time.
AL3 makes large sale, enters new market: US utilities
Dec 10, 2024
Dec 10, 2024 |
13 min
AML3D (ASX: AL3) has already delivered $14M of contract wins in the defence industry. It has also signed deals in the aerospace industry - including with Boeing. Now AL3 has won a $2.3M competitive tender in the US energy/utilities industry.
US Navy Now Demanding 3D Printed Parts, Or Else…
Nov 22, 2024
Nov 22, 2024 |
13 min
Our 2024 Tech Pick of the Year AML3D (ASX: AL3) has a Master Licensing Agreement in place with BlueForge to 3D print parts for the US Navy. AL3 said today that they have been “guided to expect significant growth in US demand following the award” of this US $951M contract to Blue Forge Alliance.
Global defence spending up, AL3 revenue up, US sales up.
Oct 29, 2024
Oct 29, 2024 |
12 min
Is the share price about to break its 52 week high? Just as our Investment AML3D (ASX: AL3) is about to start a big push into the US?
AL3 Signs Key Agreement For US Navy Submarine Parts
Sep 12, 2024
Sep 12, 2024 |
10 min
Our 2024 Tech Pick of the Year AML3D (ASX: AL3) just signed a Manufacturing License Agreement with a US Navy intermediary…
AL3’s Quarterly reveals new agreement with Boeing, and more than 500% growth in cash receipts
Jul 24, 2024
Jul 24, 2024 |
13 min
Today, our 2024 Tech Pick of the Year AML3D (ASX: AL3) released strong numbers in its quarterly report. Their final year number for FY24 is $8.5M.
AL3 Opens US Facility, With War Chest to Scale
Dec 12, 2024
Dec 12, 2024 |
3 min
Today, our 3D printing Investment AML3D (ASX: AL3) announced its new US facility is now fully operational.
AL3’s New Sale to a US Utility
Dec 9, 2024
Dec 9, 2024 |
3 min
Today, our 3D printing Investment, AML3D (ASX: AL3) made its first sale into a new industry, by making a ~$2.3M sale to US utility provider, the Tennessee Valley Authority (TVA).
AL3 to help US Navy supply chain?
Sep 24, 2024
Sep 24, 2024 |
4 min
Our 2024 Tech Pick of the Year, AML3D (ASX: AL3), stands to benefit as challenges in the US Navy’s supply chain take centre stage.
Revenues up +10X for AL3
Aug 27, 2024
Aug 27, 2024 |
2 min
Our 3D printing Investment and 2024 Tech Pick of the Year, AML3D (ASX: AL3) released its annual report today, which detailed major progress for the company.
AL3 Gets Milestone Payment
Aug 5, 2024
Aug 5, 2024 |
2 min
Today our 3D printing Investment, AML3D (ASX: AL3) has announced that its industrial-scale ARCEMY 3D metal printing system ordered by US defense contractor Cogitic Corporation has been successfully commissioned and is now operational.
6-8 Week Bull Run: Recovery Signal?
Dec 15, 2024
Dec 15, 2024 |
18 min
There is a big positive to take away from the last 3 months. Over the last two years it was rare to see a good, fully green week. Let alone two in a row. It was grim. So for the small end of the market to have finally strung together a full 6-8 week bullish run is certainly a big milestone for positivity returning.
What Newsflow is left for this Year?
Dec 7, 2024
Dec 7, 2024 |
19 min
In the business world, the christmas break is often treated as an “artificial deadline” to get deals done and finish projects. Three weeks ago we said we are watching 16 companies that had guided the market to expect material news before christmas… Usually only a handful of companies that guide news actually deliver it on time.
A Quiet, but Green Week in the ASX
Nov 30, 2024
Nov 30, 2024 |
18 min
It was another quiet-ish week across much of the small cap markets. The smaller end of the market where we operate appears to be in a holding pattern of sorts.
Market Optimism Peaks Ahead of the Holidays
Nov 16, 2024
Nov 16, 2024 |
11 min
The world is still digesting what exactly the US election result will mean for the next four years. The weeks after an election is often a “honeymoon phase”.
Insights from Industry Leaders at IMARC
Nov 2, 2024
Nov 2, 2024 |
17 min
A few of our team was in Sydney this week for the IMARC conference, and to hear from some of our Portfolio Companies. IMARC is the largest mining conference in Australia - so the big mining companies show up, but also well attended by small cap companies and investors. The sentiment “vibe” is definitely improving, something we’ve been observing and pointing out in recent weekend editions.
