Discussion Materials

3D Systems Corporation

3rd Dec 2013

Table of Content

Section 1

Section 2

Section 3

Section 4

Section 6

Section 5

Section 7 Valuation: DCF Analysis

Valuation: DCF Assumptions

Valuation: Comparable Company Analysis

Investment Thesis

Earnings Drivers Analysis

Business Model

Company Profile

Section 8 Sensitivity Analysis & Recommendation

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Business Overview • 3D Systems is a US based leading provider of 3D

content-to-print solutions including 3D printers, print

materials and on-demand custom parts services for

professionals and consumers

• DDD incorporated on May 14, 1993, is a holding

company that operates through subsidiaries in the

United States, Europe and the Asia-Pacific region

• It has $5.86billion market cap and $414.97million

ttm revenue

• Its Strategies focus on:

- Build global service and expand through

acquisition and organic growth

- Develop new products through channels and

leveraging customer base and core competencies

Company Profile

3D Systems Corporation (NYSE: DDD)

Stock Price Performance US$

Recent Highlights • January 3, 2012 the Company completed the

acquisition of Z Corporation and Vidar systems

Corporation for $2.9milliom

• April 2012 it acquired My Robot Nation and

Paramount Industries

• May 2012 the Company acquired FreshFiber BV and

Bespoke Innovations, Inc

• July 2012 it acquired Viztu Technologies

• October 2012 it acquired Tim Modelmakers B.V. and

Rapidform

• August 2013 the Company acquired TeamPlatform

cloud-based, collaborative design and project

management platform, and CRDM

Source: Company Website

Key Statistics

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

2013 2015 2017 2019

3D Printer Forecast(1)

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

2013 2015 2017 2019

Product Lifestyle Management Forecast

Source: Company Website

Notes:

1. Company management forecast

2. Breakdown of sales

US$ MM

US$ MM

Source: Capital IQ

Europe41%

A-Pac14%

North America

45%

By Geography(2)

Services29%

Printers34%

Print Materials

37%

By Category

Market Cap 5.86Bn

Trailing P/E 133.26

1-Yr est. P/E 43.38

EV/EBITDA 54.46

Revenue 414.97MM

Gross Profit 181.20MM

Net Income 39.65MM

D/B 3.8

LFCF 27.44MM

Source: Company Website

(As of 22nd Oct 2013, US$)

3

Major Products Performances

• Printers and Systems: Sales have increased by 40%

over the last 10 years; management believes annual

shipments increase from 5,000 printers sold in 2009

to 85,000 in 2015

• 3D Print Materials: Historically, the company’s

most profitable revenue segment, with a 62% gross

margin; management believes this will be the

strongest revenue driver as their most recent printers

require a specifically designed material

• Services: DDD has an extensive assortment of

printers and on-demand 3D custom parts service

allowing clients to purchase upgrade kits and to take

advantage of their new enhanced system capabilities

Business Model

Business Model

Business Strategies

• Organic Business

- Increasing Global R&D spend (75%+ in 2012)

fueling demand for 3D printers

- Product evolution drives increase in component

count and complexity; Democratization expands

opportunity into education, consumer and DIY

- Sustainability attributes –reduced waste, cost and

carbon footprint- enhance attractiveness

• Acquisition Synergies

- DDD has acquired 12 competitors to expand

their portfolio in the last two years

- They enhanced the performance of personalized

manufactured items and will drive the

technology forward

Democratize creativity by

providing integrated 3D

content-to-print solutions

that cover the entire

ideation-to-production

process for the benefit of

professionals and

consumers alike

Expand on

demand-

parts

services

globally

Accelerate

3D

printer

penetration

Grow

healthcare

solutions

Build

significant

consumer

& retail

capabilities

Focused Growth Initiatives

• Customers

- DDD has a well diverse

customer base throughout

different industries, ranging

from Ford, Caterpillar and

Boeing

- Customers have complete

freedom to print complex 3D

plastic or metal parts directly

from 3D digital data without

tooling or complex setups

- 3D Systems provides a

compelling business model

that is cost effective and can

change their customers’

traditional design-to-

manufacturing processes

• Management Team

Strong technical experiences

required in extremely volatile

business environment

Charles W. Hull (since 1997)

Executive Vice President and

Chief Technology Officer; solely

responsible for over 60 U.S

patents in prototyping

Abe Reichental (since 2003)

President and CEO; over 30

years of various technical,

marketing, operating positions

experience and leadership

Source: Analyst Presentation

4

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5058

71

103

35 32

47

93

124

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20

40

60

80

100

120

140

2008 2009 2010 2011 2012

Printers and other products Materials Services

139

113

160

230

354

0

50

100

150

200

250

300

350

400

2008 2009 2010 2011 2012

Fundamental Analysis

Earnings Drivers Analysis

• Sales increased in 2012 by 54%

due to increased volume across

all sales categories primarily

from increased demand from

printers and on-demand custom

parts services, both organic and

from acquisitions; and 5 years’

CAGR is 20.5%

• The increase in sales (89.6%)

from printers and other

products for 2012 compared to

2011 was primarily the result of

increased sales volume, driven

by increased demand for

personal/professional printers

and acquired sales from the Z

Corp and Vidar acquisitions

completed in 1Q2012

• All geographic regions

experienced higher levels of

revenue in 2012 compared to

2011 due to continued global

R&D spending leading to higher

levels of printer sales and print

materials sales

• The banking crisis combined

with economic weakness led to

negative impact of foreign

currency translation for the

European region, while a

strengthening Japanese Yen for

most of 2012 resulted in a

favorable foreign currency

translation for the Asia-Pacific

region Source: 2012 10-K

5

2

9

28

46

82

0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012

55 49

72

118

196

3224 27

35 4030 25

3848

61

2215

2229

57

0

50

100

150

200

250

2008 2009 2010 2011 2012

USA Germany Other Europe Asia Pacific

Total Sales

Geographical Sales Segmental Sales

Total EBITDA US$ MM

US$ MM US$ MM

US$ MM

• Supplier Power – Moderate

In the additive manufacturing

industry there are multiple

suppliers that produce their raw

materials. This makes the

suppliers compete for customer

sales which decreases the price

• Barriers to Entry – Moderate

and increasing

Barriers in 3D printers industry

is high as the firm will need a lot

of capital and a strong R&D

team to produce the technology

advanced printers the price

• Buyer Power – Moderate and

increasing

As printing technologies are

able to mature, increased

competition will increase buyer’s

leverage

• Threat of Substitutes –

Moderate and decreasing

Additive manufacturing industry

is not an essential function in

company’s business model as

they still use mass

manufacturing machines

• Degree of Rivalry – High

As the product becomes easier

to duplicate and manufacture

and as equipment costs go

down, the number of

competitors will increase

6

Fundamental Analysis

Investment Thesis Arguments

Market Outlook

S.W.O.T.

Analysis

Catalysts

• The demand for cheaper and simpler 3D printers is very clear as a company would rather

print a spare part at home verses airfreight an urgently needed spare part from abroad

• The demand for more elaborate machines is increasing - using the 3D printing customers

will be able to picture the ending products they want to but in different areas such as jewelries

• Strengths

- Recurring sales buckets from print materials and services revenue segments

- Proven research and development departments and able to produce new products to

improve their additive manufacturing

- DDD help cut customers cost by reducing their production lines while increasing their

throughput rate by enabling them to produce single items quickly and cheap rather than

exporting abroad for the rare part

• Weaknesses

- High capital expenditure for machines

- Objects will become a lot easier to copy, distribute and pirate in the future thus making it

easier to breach intellectual-property laws

• Opportunities

- Increasing demand from growth markets of China and India and their ability to speed up

the design process will have a big impact on the 3D printing industry

- Once the printers cost decrease and their speed increases there will be a surge in demand

and manufacturers will look to adapt the technology since 3D printers allow for the

creation of parts in shapes that conventional technique cannot achieve

• Threats

- The major threat is expanding too fast carrying much debt and potentially being unstable

for the business

- Whether could afford the intervention of start-up companies with new technologies

- The established technique of mass-manufacturing will not go away and that they cannot

interrelate with 3D printers

- If technology does not improve revenue considerably then the cost of it not descend the

profit to an unmatched level

• Upside: There is a global market for additive manufacturing which worth $1.2 billion in 2008

and predications have it doubling in size by 2015, providing potential to transform the mass

manufacturing

• Downside: DDD will face exchange rate risk as half of their sales are abroad and their input

cost can be greatly affected by probable rise of the commodity cost of hard metals and plastics

Implied Valuation From Comparables

Mean Implied Implied Implied Median Implied Implied Implied

Multiple Value EV Equity Value Share Price Multiple Value EV Equity Value Share Price

P/E LTM 85.2x 6,086 68.19$ P/E LTM 92.4x 6,597 73.92$

P/E 2013E 50.5x 5,404 60.55$ P/E 2013E 43.8x 4,691 52.56$

P/E 2014E 34.4x 4,301 48.19$ P/E 2014E 24.0x 2,993 33.53$

EV/EBITDA LTM 30.6x 4,593 4,660 52.21$ EV/EBITDA LTM 21.9x 3,285 3,352 37.56$

EV/EBITDA 2013E 21.3x 4,041 4,108 46.02$ EV/EBITDA 2013E 13.6x 2,584 2,651 29.70$

EV/EBITDA 2014E 18.7x 4,498 4,565 51.14$ EV/EBITDA 2014E 12.4x 2,976 3,043 34.10$

Average Implied Share Price 54.38$ Average Implied Share Price 43.56$

Valuation

Comparable Company Analysis (As of 29th Nov 2013)

Source: Bloomberg

US Listed Large Cap Computer Peripherals Manufacturers

Price/ Enterprise Value/

Share % 52-wk. Equity Enterprise LTM 2013E 2014E LTM 2013E 2014E Div.

Company Price High Value Value EPS EPS EPS EBITDA EBITDA EBITDA PEG(5-Yr) Yield

Electronics for Imagin(EFI) 35.15$ 88.3% 16,533$ 1,291$ 18.0x 22.9x 20.5x 10.3x 9.6x 9.6x 1.7x -

Dassault Systems(DASTY) 117.28$ 86.7% 14,775$ 12,867$ 31.7x 24.9x 22.9x 13.7x 12.4x 12.4x 2.3x 0.98%

Stratasys(SSYS) 114.38$ 95.1% 5,456$ 5,352$ - 62.8x 48.4x 39.7x 29.5x 29.5x 6.2x -

Universal Display(OLED) 30.36$ 79.7% 1,403$ 1,155$ 131.6x 60.1x 25.0x 27.0x 13.6x 13.6x 2.7x 0.61%

Voxeljet AG(VJET) 40.61$ 95.6% 663$ 1$ - - - - - - - -

Immersion(IMMR) 12.92$ 77.2% 370$ 305$ 92.4x 27.5x 15.2x 21.9x 12.4x 12.4x 3.8x -

Mercury Systems(MRCY) 9.30$ 88.8% 309$ 269$ - - - 17.2x 17.2x 8.5x (7.1x) -

3D Systems(DDD) 75.52$ 89.0% 7,725$ 7,210$ 116.3x 77.0x 60.6x 64.2x 42.5x 36.0x 1.8x -

Average 85.2x 50.5x 34.4x 30.6x 21.3x 18.7x 1.6x 0.80%

Median 92.4x 43.8x 24.0x 21.9x 13.6x 12.4x 2.7x 0.80%

($ in millions, except per share data)

I/S Hist. Proj. B/S Hist. Proj.

2010A 2011A 2012A 2013E 2010A 2011A 2012A 2013E

Sales (Growth) Assets

Printers and other products 21.9% 90.2% 47.3% AR Days 82 81 82 82

Print Materials 20.9% 46.1% 32.9% Inventory Days 101 76 89 89

Services 99.2% 32.8% 62.6% Other C.Assets. % Sales 0.8% 1.0% 1.1% 1.0%

COGS (Margin) Liabilities

Printers and other products 61.0% 62.5% 57.2% 60.2% AP Days 113 78 68 86

Print Materials 38.9% 35.2% 31.8% 35.3% Accr. Exp % Sales 4.3% 3.6% 2.4% 3.4%

Services 63.9% 58.9% 54.3% 59.0% Other C.Liabilities. % Sales 15.1% 10.7% 9.7% 11.8%

SG&A % Sales 26.5% 26.0% 27.5% 26.7% ST Debt 224 163 174 174

R&D % Sales 6.7% 6.2% 6.6% 6.5% LT Debt(1) 8,055 138,716 87,974 709,767

Valuation

DCF Assumptions

Notes:

1. Injected the capital debt for purchasing in 2013

2. Levered Free Cash Flow (Deducted the net interest expenses)

($ in 000’, except per share data)

Free Cash Flows Projected Fiscal Years Ending,

Projections 2013P 2014P 2015P 2016P 2017P 2018P 2019P 2020P 2021P 2022P

Net Income 11,722 28,692 55,018 95,237 156,222 248,528 388,457 601,346 926,775 1,426,871

+ Depreciation 42,693 48,922 54,869 60,956 66,973 73,026 79,061 85,104 91,143 97,185

+ Amortization 67,379 78,236 88,073 98,421 108,513 118,733 128,889 139,077 149,249 159,429

- ∆ OWC 6,270 (21,998) (33,501) (51,295) (78,939) (122,062) (189,587) (295,687) (462,933) (727,330)

- Capex (49,009) (50,213) (50,814) (51,115) (51,266) (51,341) (51,378) (51,397) (51,407) (51,411)

- Intangibles Invest. (136,502) (140,436) (142,403) (143,387) (143,878) (144,124) (144,247) (144,309) (144,339) (144,355)

LFCF(2) (57,449) (56,797) (28,759) 8,818 57,626 122,760 211,195 334,134 508,489 760,389

DCF Valuation – XNPV Method

( + ) TV (7.0x terminal multiple) 17,309,979

Discount Factors 0.899 0.809 0.728 0.654 0.588 0.529 0.476 0.428 0.385 0.346

Total cash flow – Multiple method (53,377) (47,570) (22,468) 4,304 32,525 63,663 99,298 141,889 194,702 6,257,134

Enterprise Value – EBITDA multiple method 6,670,099

( + ) TV (5.0% terminal growth) 12,855,120

Discount Factors 0.899 0.809 0.728 0.654 0.588 0.529 0.476 0.428 0.385 0.346

Total cash flow – Perpetuity method (53,377) (47,570) (22,468) 4,304 32,525 63,663 99,298 141,889 194,702 4,714,319

Enterprise Value – Perpetuity growth method 5,127,283

• Capital Structure

- Assumed the buyer uses

10% debt and 90% equity to

fund the transaction

- Assumed 30% control

premium to be added on the

purchase price

- Took the 11.2% discounting

rate and 7.0x terminal value

as our recommended

scenario

• WACC(1)

- Adjusted higher the risk

premium of computer

peripherals sector since

DDD has the services

segment which has higher

market risk premium

- Beta is based levered

industry average

- Risk free rate is based on

10-year T-Bill rate

- Interest rate of LT debt is

based on LIBOR(2) rate

added by the fixed rate

5.57% which is the senior

debt cost

• Terminal Value

- Multiple: 7.0x EV/EBITDA as

benchmark

- Perpetuity: 5.0% growth rate

as benchmark

9

Valuation

DCF Analysis

Capital Structure of Purchasing WACC Calculation

% Capitalization Amounts Rm-Rf 7.50% Risk Free Rate2.75%

Debt 10% 867,113 β 1.44 →KE 13.55%

Equity 90% 7,804,016 Avg. LD Debt Interest Rate 7.30% →KD 7.30%

Enterprise Value 6,670,099 D/V 15.5% E/V 84.5%

Control Premium 30% 2,001,030 Tax Rate 35.00%

Total Purchase Price 100% 8,671,129 →WACC 12.19%

Accretive/Dilutive Projected Fiscal Years Ending,

Analysis 2013P 2014P 2015P 2016P 2017P 2018P 2019P 2020P 2021P 2022P

Net Income 9,822 26,680 52,893 92,997 153,864 246,050 385,857 598,621 923,924 1,423,891

Injected Debt 867,113 857,291 830,611 777,717 684,720 530,857 284,807 (101,050) (699,672) (1,623,595)

Accretion/Dilution - - - - - - + + + +

($ in 000’, except per share data)

Notes:

1. Weighted Average Cost of Capital

2. LIBOR is 0.60% is 2013 and assumed to be increased by 0.25% each year

Enterprise Value Equity Value Value Per Share

Terminal EBITDA Multiple Terminal EBITDA Multiple Terminal EBITDA Multiple

WACC 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x

11.20% 5,845 6,670 7,495 5,913 6,738 7,563 $66.25 $75.50 $84.74

12.20% 5,365 6,120 6,876 5,432 6,188 6,944 $60.87 $69.33 $77.80

13.20% 4,927 5,620 6,312 4,995 5,688 6,380 $55.97 $63.73 $71.49

Enterprise Value Equity Value Value Per Share

Terminal Perpetuity Growth Rate Terminal Perpetuity Growth Rate Terminal Perpetuity Growth Rate

WACC 2.5% 5.0% 7.5% 2.5% 5.0% 7.5% 2.5% 5.0% 7.5%

11.20% 3,796 5,158 8,368 3,864 5,226 8,436 $43.30 $58.56 $94.52

12.20% 3,180 4,150 6,155 3,248 4,218 6,223 $36.39 $47.26 $69.73

13.20% 2,693 3,406 4,745 2,761 3,474 4,813 $30.94 $38.92 $53.93

(57) (57) (29) 9 58

123

211

334

508

760

(100)

-

100

200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

• Free Cash Flow

Initially being negative due to

existing debt and funding debt,

but the efficiency improvement

and payout of Capex on their

business, we project that it will

increase to 760 million with

CAGR of +88.5% in 2022

• Equity(1)

High CAGR of 24.5% and 9.0x

equity fold in 10 years

• Sensitivity Analysis

- We set benchmark as 7.0x

EBITDA multiple and 5.0%

perpetuity growth rate in two

methods

- Net debt of -67.9 million is

based on 2013 pro forma

estimation

- Total shares outstanding at

the end of 2012 is 89.25

million shares

• Recommendation of Purchase

We strongly recommend $75.50

per share as the purchase price

to acquire DDD since we

consider the growth after 10

years will be moderate as 7.0x

2022 EBITDA and cost of debt

will be slightly lower than the

benchmark as the efficient

business will bear less debt

10

Valuation

Sensitivity Analysis & Recommendation

490 517 570 663 817

1,063

1,448

2,047

2,971

4,395

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Free Cash Flows Equity

9.0x US$ MM US$ MM

Note:

1. The company don’t have preferred stock or minority interest

($ in millions, except per share data)