ADDITIVE MANUFACTURING & RAPID PROTOTYPING Q3 2015

CONTACTS INDUSTRY OVERVIEW

The Additive Manufacturing & Rapid Prototyping (AMRP) industry is quickly emerging as a high
John Ferrara growth sector worth watching. Leaders in the space provide holistic manufacturing solutions that
Managing Partner can significantly enhance production efficiency and product speed-to-market. While traditional
(617) 619-3325 manufacturing is owned by single-solution providers with slower and more costly processes,
[email protected] quick-turn manufacturers are creating an exciting one-stop-shop model with sophisticated and
cohesive technologies.
Eric Williams Original equipment manufacturers (OEMs) continually seek to launch innovative next-generation
Managing Director products to avoid being marginalized in the marketplace the exact pain point that the
(215) 854-4065 proprietary technologies of rapid manufacturing are targeting. The integration of AMRP
[email protected] technologies reduces production bottlenecks, an enduring issue for the increasingly antiquated
industrial production model. The ability to rapidly service and prototype provides a significant
Mark Surowiak downstream competitive advantage for businesses embracing AMRP capabilities.
Director AMRP has quickly been adopted across major industries including aerospace, healthcare,
(215) 854-4063 consumer products, automotive, defense and industrial, among others. This evolution is driving
[email protected] significant growth in the relatively new AMRP industry. Comprised of just over 200 companies,
the industry is already approaching $4 billion with a compound annual growth rate of 22.6% from
2010 to 2015. Moreover, analysts are expecting the AMRP industry to reach over $20 billion by
2020 (source: Wholers 2014).

AMRP Industry Revenue 2010-2020 ($ in Millions)

$25,000

$20,000

$15,000
BOSTON
CHICAGO $10,000
LONDON
LOS ANGELES $5,000
PHILADELPHIA
SAN DIEGO $0
SILICON VALLEY 2010 2011 2012 2013 2014 2015 2016 E 2017 E 2018 E 2019 E 2020 E

TAMPA
Source: IBIS World
OD4581 3D Printing and Rapid Prototyping Services
 Additive Manufacturing & Rapid Prototyping
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AM applications in these END MARKET SHARE

sectors can support a $40 Industry growth is being fueled by improved technologies, ever expanding applications,
increasingly shorter product development cycles and accelerated product launch requirements.
billion market over the Due to the significant advantages offered by AMRP, many industries are weaving rapid
next 15 to 20 years with solutions into their product development processes. According to Wholers, consumer
products/electronics lead the way with 20.3% of the global AMRP market share, followed by
upside potential from motor vehicles (19.5%), medical/dental (15.1%) and aerospace (12.0%).
technological advances. AMRP technology is of particular interest within the aerospace, healthcare, automotive and
industrial sectors where product development, innovation and time-to-market are critical to
success. With advancements in materials and processes, AMRP has afforded players in these
sectors the ability to further expand their capacity to develop and manufacture complex
products that are extremely light, stable and durable. Goldman Sachs suggests AMRP
applications in these sectors could support a $40 billion market over the next 15 to 20 years
with upside potential from technological advances.

KEY GROWTH SEGMENTS

Capstone expects the medical/healthcare and aerospace sectors to lead the growth in AMRP
over the next several years. Some highlights of our thesis and observations include the
following:
Medical/Healthcare: As the most rapidly growing downstream area of the industry that
accounts for 15.1% of the market, medical firms have quickly employed AMRP services.
Available technologies are being utilized to produce a wide range of devices and
instruments such as dental implants, custom hearing aids, models of organs and bones
for pre-operative evaluations, custom prosthetics and patient specific
instrumentation/devices.
In addition, 3D printing has recently found its way into the pharmaceutical drug industry.
Earlier this month, the FDA approved the first drug manufactured by AMRP processes.
SPRITAM, by Aprecia Pharmaceuticals, is an adjunctive therapy in the treatment of
partial onset seizures. The technology is being used to produce a porous formulation that
disintegrates with a sip of water. The application of 3D printing in this capacity is a
groundbreaking achievement and provides a highly effective solution for patients that
have swallowing difficulties and are subject to greater risk.
Aerospace: Currently accounting for 12% of AMRP market share, the aerospace industry
has been a relatively late adopter. This was due to substandard quality of the initial
products. However, aerospace has since become a key growth market for AM. With the
capabilities to produce high tolerance lightweight and strong components, designers are
using AMRP in the production of engine and turbine parts as well as cabin interiors.
Robert McEwan, a general manager of Airfoils and Manufacturing Technologies at GE
Aviator, stated in in Sierra Colleges Additive Manufacturing: Turing Mind into Matter, In
our lifetime, at least 50% of a jet engine will be made by AM.*

AMRP MANUFACTURING APPLICATIONS

Engineers and designers have embraced AMRP technology due to its ability to transform the
product development cycle by offering speed, design flexibility, customization capabilities and
affordability. This quick-turn, low-cost solution allows for on-the-fly design changes and true
part customization enabling engineers to now produce multiple product iterations in the same
time it would have historically taken to produce a single model. In addition, AMRP technologies
provide a real-time feedback loop helping enhance product characteristics such as
manufacturability, fit, form, functionality and material optimization.

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Engineers can now With the introduction of interactive cloud-based interfaces and software automation processes,
designs can now be submitted, analyzed, modified, quoted and approved for manufacturing
produce multiple product concurrently on the web. As a result, designs can be approved and quoted within minutes and
iterations in the same with same day product shipping. Moreover, as material qualities and dimensional accuracies
improve, companies are using AMRP technology in a range of applications including direct part
time it would have production (19.2%), functional modeling (18.4%), patterns for prototype tooling (12.2%) and fit
historically taken to & assembly (12.1%), as illustrated below.

produce a single model.

Additive Manufacturing Applications (2014)
1.6%
7.0% 2.7% 19.2%
7.8%

8.9%

10.1% 18.4%

12.2%
12.1%

Direct part production Functional models

Patterns for prototype tooling Fit and assembly

Visual aids Patterns for metal castings

Presentation models Education/research

Tooling components Other

Source: Wholers 2014

Despite improvements in technology, AMRP capabilities do not entirely meet the product
developers and engineers requirements for dimensional accuracy, material properties and
cosmetics. As a result, several larger competitors in the sector offer quick-turn manufacturing
solutions utilizing CNC machining, injection molding and stamping capabilities. Examples of
companies embracing this holistic solution include Proto Labs, Arc Group Worldwide and
Stratasys.

COMPETITION AND DIFFERENTIATION

The industry remains nascent but its rapid growth over the last five years has attracted robust
investment activity in an attempt to capture the relatively untapped and expansive market
opportunity. Currently, there is a low market share concentration relative to traditional
manufacturing with two dominant market participants: 3D Systems and Stratasys.

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There are some This dynamic has already started to change as more companies enter the marketplace. New
entrants tend to cater to niche industry segments with differentiated specialization. This trend
companies that have has taken root in areas such as the automotive and aerospace end markets. Gaining footholds
been able to generate in niche markets allows companies to secure demand and command premium pricing as many
of their clients represent the early adopters.
above-market
profitability by offering BARRIERS TO ENTRY

superior service. On the surface, there are moderate barriers to entry in the industry with capital equipment
accounting for the vast majority of initial startup costs, namely 3D printers and CNC injection
machines. Many smaller firms are forced to source their printing equipment from external
manufacturers. Beyond capital equipment, raw materials represent the next significant
component of a firms cost structure but are not very much of a factor. Because there are a
small number of refined material suppliers, players in the industry experience the same price
fluctuations for raw materials, such as thermoplastics or nylon. However, the competitive
barriers lie much more in advanced capabilities. Sophisticated and integrated solutions, such as
automated quotation, engineering systems and front-end web client interfaces separate the
market leaders from the remaining fragmented pack.

KEY SUCCESS FACTORS

Companies in the industry compete on features, not price, and this may provide the highest
opportunity for emerging firms. The majority of rapid manufacturing providers primarily focus
on in-house tooling and production. However, there are some companies that have been able
to generate above-market profitability from offering superior services, including advanced
mold making, CNC machining and personal customer service. Having an integrated operation is
vital, as the largest firms in the industry have prospered from maintenance and services
revenue following the initial product sale.
Apart from offering a wide range of services and technologies, rapid manufacturers have
potential to separate themselves by offering customization capabilities. Nearly all companies
provide quick in-and-out mass services with little accommodation for things like design, color
and structure that differ from built-in molds. Because of this, the consumer sector is almost
entirely untapped and has significant growth potential.
Finally, rapid manufacturers and quick-turn prototype companies compete on speed, quality
and proficiency in producing complex parts. Solutions such as short-run prototyping, low-
volume injection molding and modernized high speed CNC machining reduce processing time.
With interactive quoting and customer service, something not all rapid manufacturers have,
the process can be accelerated. Quick-turn producers who can promise design-to-delivery in
less than two weeks tend to have much more success.

M&A AND INVESTMENT ACTIVITY

A wide variety of businesses have been acquired in the AMRP industry over the last few years.
The healthy deal flow is a reflection of the industrys growth and attractiveness, as well as
companies in the space that continue to vie for market share through acquired technologies,
new geographic markets and customers. We expect to see a growth in the number of
transactions as the industry continues to accelerate and investors look to participate.
Major companies like 3D Systems and Stratasys have been eager to grow their companies
through numerous strategic acquisitions. While, there has also been an influx of more strategic
players in the marketplace. Additionally, private equity players have become more aggressive,
attracted by the growing industry prospects.

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The capital markets have Summary M&A Activity (2013 to YTD 2015)
been open across the
2013 2014 2015* TOTAL
board with robust Party/Group
# % # % # % # %
strategic M&A activity,
active PE investments and 3D Systems 8 33% 4 8% 3 12% 15 14%
successful IPOs.

Stratasys 2 8% 4 8% 2 8% 8 8%

Other Strategics 10 42% 28 57% 8 32% 49 47%

Private Equity 4 17% 13 27% 12 48% 32 31%

*The 2015 data is as of September 30, 2015

Total 24 100% 49 100% 25 100% 104 100%

As illustrated above, the industry is attracting increased levels of institutional investment from
the private equity community. In 2013, only four notable deals occurred, representing 17% of
the M&A market. That volume jumped quickly to 13 deals (a 27% market share) in 2014.
Moreover, there have been 12 deals YTD in 2015 already, representing a 48% market share.
Globally, PE firms of particular interest have included The Riverside Company (US), Cornerstone
Capital (US), CorpAcq (UK) and SkyLake (Korea), among others.

IPOS AND PUBLIC MARKETS

Notwithstanding the fevered pace of excitement that has built up within the sector, resulting in
bullish market sentiment and stratospheric market valuations, some industry bellwethers have
recently showed signs of weakness and are looking at troubled waters ahead. 3D Systems,
whose stock price traded at a 52-week high of $38.07, is now trading near its low of $8.44. It
also reported an operating loss for the quarter ending September 30, 2015 of $34.6 million due
to margin compression and higher operating expenses. Additionally, 3DS is facing litigation
issues and recently saw their CEO, Avi Reichental, resign. Stratasys, is in no better condition
having reported a drop in revenue of 17.6% revenue (driven entirely from a reduction in
product sales) to $167 million compared to the same period last year and reported operating
losses of $931 million for the quarter ending September 30, 2015.
While both 3D Systems and Stratasys have historically been a litmus test within the industry,
their woes appear to be self-contained, due largely to undisciplined acquisition strategies, and
poor integration and execution. Moreover, both companies have suffered from fierce
competition from international players offering cheaper and more sophisticated printers.
Conversely, Proto Labs reported a strong 3Q with revenue and gross profit up 24.3% and 21.9%,
respectively, over 3Q 2014. Quarter-over-quarter, Proto Labs also experienced growth in each
product line with the strongest growth coming from its 3D printing operations of 79%.
The bottom line is that the industry remains robust and continues to see major players enter
the market such as Autodesk and Hewlett-Packard.

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SELECTED DEAL BRIEFS

3D Systems Corporation acquires Cimatron Ltd. (February 2015)

In a deal valued at $96.5 million and 10x EBITDA, 3D Systems acquired all shares of Cimatron
Ltd. Cimatron designs, develops, manufactures and supports computer-aided design and
consumer aided manufacturing (CAD/CAM) software products. With over 300 employees, the
inclusion of Cimatron will enable 3D Systems to enhance its 3D digital fabrication as well as add
comprehensive 3D CAD/CAM solutions. 3D Systems President and CEO, Avi Reichental, said
Cimatron represents a perfect strategic fit for our business by providing expanded capabilities
in product development, sales coverage and complementary technology. We believe that this
combination offers unique synergies with significant long-term customer benefits and
shareholder value.
The integration of Cimatron into an additive powerhouse like 3D Systems strengthens 3Ds
leadership position in 3D-printing-centric advanced manufacturing by enabling a digital
workflow between design and traditional manufacturing processes. The transaction adds
complementary technology, extends 3Ds sales coverage globally and is expected to be
accretive to the companys 2015 cash generation earnings per share.

The Riverside Company acquires Fisher/Unitech (November 2014)

Fisher/Unitech (Fisher) operates as a value-added reseller in the additive manufacturing field,
with 13 locations focusing on 3D SOLID modeling software, 3D printing hardware and related
products and services. The company has been partnered with Stratasys for 15 years and was
named North Americas leading Stratasys reseller in 2010. Fisher has more than 8,000
customers, including some of the most prominent manufacturers in aerospace, consumer
goods, automotive and defense.
Riverside has a rich history of investing in discrete manufacturing companies. It has invested in
more than 80 specialty manufacturing and distribution platform companies. Riversides growth
plans include investing in the companys sales, marketing & tech support efforts to capitalize on
the strong growth in the core product offering. Riverside additionally plans to enter new
markets and product offerings organically through add-on-acquisitions.

Stratasys Ltd. Acquires Solid Concepts Inc. (July 2014)

Solid Concepts is a custom manufacturing solution company with technologies for additive
manufacturing, rapid prototyping, cast urethanes and injection molding. Since 1991, Solid
Concepts has provided engineering expertise to bring success to new products in the
aerospace, medical and consumer product markets. Following this acquisition, Stratasys plans
on combining some of its other recently acquired holdings (Harvest Technologies and RedEye)
to form a single cohesive advanced additive manufacturing network. The combination of these
entities will provide customers with a wider variety of advanced technologies, a higher level of
expertise and an extensive production capacity.

David Reis, Statasys CEO, said, These transactions are consistent with our core strategic
imperatives and M&A strategy, which is focused on acquiring leading companies to support our
goal of continued leadership in the segments in which we operate, as well as reaching new
niche verticals. We will apply our integration expertise to combine Solid Concepts and Harvest
Technologies with our existing RedEye digital manufacturing service business to form a single
business unit focused on additive manufacturing services

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SELECTED DEAL BRIEFS (CONTINUED)

Proto Labs acquires FineLine Prototyping (April 2014)

Proto Labs acquired North Carolina based FineLine Prototyping, a major prototyping force
which relies heavily on additive manufacturing. In the past, Proto Labs stated they had no
intention of investing in 3D printing, but this has clearly changed. The acquisition was strategic
in nature, allowing them to cater to a larger portion of their customers prototyping needs, as
about 70% of Proto Labs customers also rely on prototyping via 3D printing. The transaction
was valued at $37 million, resulting in a 3.8x revenue multiple.
The company plans to use FineLines North Carolina facility as its additive manufacturing hub,
operating under the Proto Labs name, but they plan to keep the FineLine moniker as the brand
name for its 3D printing services. Proto Labs President and CEO Vicki Hold remarked, The
acquisition of FineLine is consistent with Proto Labs strategy to expand sales to product
developers through envelope expansions and addition of new service offerings which reduce
time, cost and waste in new product development. With this addition, Proto Labs is setting
themselves up to be a powerhouse within a rapidly growing industry.

ARC Group Worldwide acquires ATC and Thixoforming (April 2014)

ARC Group Worldwide, Inc., a leading global provider of advanced manufacturing and 3D
printing solutions, acquired Advance Tooling Concepts (ATC) and Thixoforming. ATC is an
industry leading plastic injection molder offering complete, turnkey plastic injection molding
capabilities. They also offer in-house molding and tooling expertise to customers in high growth
markets including the medical device, electronic, consumer and defense industries.
Thixoforming is a leading provider of magnesium injection molding, producing complex, high-
density injection molding components from magnesium alloys.
ARC Group Worldwide stated in the press release, With the addition of ATC and Thixoforming,
ARC has materially strengthened its leading suite of advanced manufacturing, 3D printing and
associated tooling capabilities. ARC's new tooling, plastic injection molding and magnesium
injection molding capabilities further accelerate the adoption of ARC's advanced manufacturing
and 3D printing services, as ARC aims to become a holistic solution provider for its customer
base. Further, both ATC and Thixoforming provide ARC with significant new customer bases,
enabling cross-selling opportunities across the full suite of ARC products and services.

Laird PLC acquires South Korean-based Model Solutions (April 2014)

Laird PLC acquired 51% of Model Solution, a South Korean Company specializing in quick-turn
tooling and the production of injection molded parts, for over $67 million and 2.2x revenue.
Model Solution is complementary to Lairds existing design innovation and manufacturing
capabilities. Its high quality and fast turnaround prototyping ability will enhance Lairds service
to existing and new customers in the early prototype phases.

The acquisition provides Laird a South Korean platform to service leading customers in the
electronics industry and other international OEMs. It also allowed access to a broad customer
base in different market segments and complements the organic investment of capacity
expansion in Vietnam announced earlier in the year. David Lockwood, Laird CEO remarked,
This acquisition shows our strategy at work. It allows us to further penetrate the important
strategic market that is Korea, demonstrating a broader offering to customers who value the
importance of innovative design and speed of delivery.

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SELECT AMRP M&A TRANSACTIONS
Enterprise EV / LTM
Value
Date Target Acquirer Target Business Description (mm) Revenue EBITDA

Alphas Selected Provides selective laser sintering, direct metal laser sintering and
10/02/15 Proto Labs - - -
Assets stereolithography capabilities services in Europe.

Develops software solutions for industrial additive design and

09/23/15 netfabb Autodesk - - -
manufacturing.

RTI International Offers a portfolio of titanium mill products, extruded shapes, formed and
07/23/15 Alcoa $1,490.6 1.9x 12.9x
Metals 3D-printed parts, as well as high speed machined components.

RTC Rapid Provides rapid prototyping technologies for design, engineering and
07/02/15 Stratasys - - -
Technologies manufacturing predominantly in the German-speaking regions.

Mechtronic Cornerstone Capital Offers engineering, prototyping, manufacturing and product life-cycle
04/30/15 - - -
Solutions Holdings support services to a variety of industries.

Easyway Design Designs, develops, manufactures and markets 3D printers and related
04/02/15 3D Systems - - -
and Manufacture products, print materials and services in China.

INITIAL and
03/26/15 Groupe Gorg Manufactures 3D printed parts, components and 3D printers in Europe. - - -
NORGE Systems

Provides consultancy and research solutions in the areas of additive

02/27/15 Econolyst Stratasys - - -
manufacturing (AM) and 3D printing (3DP) for clients.

Bentley Sells Smart3DCapture software used in reverse engineering, rapid

02/10/15 Acute3D - - -
Systems prototyping and 3D printing.

Intelligent
02/10/15 Stratasys Provides 3D printing services in China. - - -
CAD/CAM

Designs and manufactures full-color 3D desktop printers for business and

01/05/15 botObjects 3D Systems - - -
home applications.

11/25/14 Robtec 3D Systems Develops rapid prototyping technologies in Brazil and Latin America. $21.9 - -

The Riverside Provides Product Lifecycle Management (PLM) technology solutions to

11/17/14 Fisher/Unitech - - -
Company manufacturing companies including 3D printing and rapid prototyping.

First Sunningdale Manufactures ultra-precision molds and plastic injection molded

11/12/14 $80.0 0.6x 4.7x
Engineering Tech components for performance-critical engineering applications.

EPM Global Provides electronics manufacturing services to OEM's including rapid

10/16/14 Vexos - - -
Services prototyping, manufacturing, design and engineering.

Vector D3 Technical Distributes 2D and 3D computer aided and drafting design Autodesk
10/13/14 - - -
Graphics Services solution.

Provides 3D conceptual design and manufacture services including rapid

10/01/14 Propshop voxeljet - - -
prototyping services for large parts and models.

Manufactures custom additive blends, non-dust blends, 3D printing and

09/30/14 Addipel Maroon Group - - -
additive manufacturing materials.

Designs, prototypes and manufactures precision and plastic parts in

08/13/14 APP and APM 3D Systems - - -
addition to a manufacturing company.

Olympus Manufactures precision machined components in the UK with services

08/11/14 CorpAcq - - -
Engineering including 3D printed rapid prototyping with 24 hour turnaround.

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SELECT AMRP M&A TRANSACTIONS (CONTINUED)
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA

Bordner & Provides rapid prototyping, manufacturing and product development

08/06/14 3D Systems - - -
Associates services.

Harvest Produces prototypes and production parts, offering laser sintering,

08/01/14 Stratasys $19.5 - -
Technologies stereo lithography, CNC machining and other technologies.

Provides additive manufacturing/3D printing, rapid prototyping, tooling

07/14/14 Solid Concepts Stratasys $190.0 2.9x -
and injection molding services in North America and internationally.

Tatra Plastics Designs, manufactures and prototypes round, oval and square plastic
07/10/14 Coral Products $4.2 0.8x -
Manufacturing tube and profile extrusions, co-extrusions and injection moldings.

05/19/14 EOS Solutions Prostep Provides 4D simulation and 3D visualization solutions. - - -

Interfacial Provider of idea-to-production contract R&D services to the plastics

04/30/14 Stratasys - - -
Solutions industry.

FineLine Provides precision prototyping and manufacturing services including

04/23/14 Proto Labs $37.0 3.8x -
Prototyping stereo lithography, selective laser sintering and 3D printing services.

Model Laird and Engages in prototype model making and quick-turn tooling and
04/22/14 $67.6 2.2x -
Solutions SkyLake production of injection molded parts in South Korea.

Contemporary Provides electronic manufacturing services including prototype services

04/08/14 CR Assembly - - -
Research that include 24 hour turnaround time available for prototype assemblies.

Manufactures and supplies ultra-precise and 3D laser scanning systems

03/14/14 Laser Design CyberOptics $3.7 0.6x -
and services worldwide.

Provides production CNC machining, prototype machining, prototyping,

01/30/14 Pro CNC Trulife Group - - -
3D printing, contract assembly and engineering services.

Operates as a functional prototype center that uses 3D printing and

01/28/14 e-Prototypy Materialise $1.7 - -
scanning technologies in Poland.

Sysopt
01/23/14 Stratasys Provides 3D printing applications and solutions in South Korea. - - -
Engineering

Realtime Dassault
01/13/14 Provides 3D visualization software, consulting and creative services. $232.5 2.3x 18.3x
Technology Systemes

01/02/14 Xerox 3D Systems Operates in product design, engineering and chemistry group. $32.5 - -

MEAN $181.8 1.9x 12.0x

MEDIAN $34.8 2.1x 12.9x

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PUBLIC COMPANY SPOTLIGHT PROFILE

PROTO LABS
Based in Maple Plain, Minnesota and founded in 1999, Proto Labs (PRLB) manufactures CNC
machined, injection molded and 3D printed custom parts for prototyping and short-run
production in various markets including medical, aerospace, electronic, consumer products and
Proto Labs is pushing the industrial machinery. Proto Labs is the worlds largest provider of part-making services to
technology envelope to product developers. The company works with innovative product designers and engineers to
help bring their ideas from concept to market quickly.
produce bigger and more
complex parts, The business first introduced the Firstcut CNC machining service and opened up manufacturing
facilities in Europe and Asia. In 2009, the company combined its Protomold and Firstcut
introducing the Firstcut
services under one corporate name, Proto Labs, to reflect its growing capabilities.
CNC Machining service
Proto Labs plans to expand its manufacturing processes through acquisitions in an attempt to
and opening up expand its customer base and broaden its parts envelope. The company looks to establish
manufacturing facilities in more advanced technologies to increase the size and complexity of its modeling capabilities.
Europe and Asia. Additionally, with a marketing staff of approximately 30+ and a global support staff of 200+,
Proto Labs has been able to establish itself as an industry cornerstone that looks to keep
growing.

In April of 2014, Proto Labs established its 3-D printing branch in an acquisition of Fine Line
Prototyping. Prior to the move, Proto Labs had no services in 3-D printing, something 70% of
the companys customers utilized. Now the Fine Line branch of the business does all of the
additive manufacturing services through embracing stereolithography and laser sintering. This
was a large strategic move for one of the pioneers of the industry, with immediate market
impact. Fine Line accounted for $9 million in revenues in 2014.

Currently, Proto Labs has over 1,000 employees and just recently surpassed $200 million in
sales in 2014. This illustrates a considerable growth pattern, as 2010 revenues were $65 million
with $16 million income from operations, opposed to almost $61 million in 2014.

Capstone has been impressed with Proto Labs industry foresight and recognizes it as one of the
first companies to combine CNC machining, injection molding and 3D printing. The businesss
speed and versatility allows customers to take parts from very early stages of prototyping all
the way up to the final short-run production of over 10,000 parts, all with one technology-
driven process.

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PUBLIC COMPANY SPOTLIGHT PROFILE

ARC GROUP WORLDWIDE

Founded in 1987 and based in Florida, ARC Group Worldwide (ARC) is a leading global advanced
manufacturing and 3D printing service provider. In addition to being the world leader in metal
injection molding, ARC is a leading provider of metal and plastic 3D printing, tooling, plastic
injection moldings and automated machining. The company operates in three segments, which
ARC has become a world include the precision component, fitting and wireless groups.
leader in metal injection
ARC provides plastic injection, in house moldings, tooling products, high-density injection
molding, providing its molding components from magnesium alloys and value-added secondary design and
customers with a production processing services. Additionally, the company offers custom machining products
and flange facings, precision net shape metal components as well as hardware products.
compelling portfolio of
advanced manufacturing ARC believes the methodologies of how products get manufactures will change over the next
10 years, due to technological automation, 3D printing and other advancements. Their strategy
technologies. is to expand through their 3D metal service bureau platform. To do this, ARC plans to monetize
substantial investment in personnel, equipment and technology as well as continuing to work
with previous customers on new production programs.

The quick-turn manufacturer has shaped its strategy around being a one-stop shop for its
customer base by providing holistic solutions for metal and plastic fabrication. Additionally,
ARC offers its services cradle to grave in an attempt to avoid lengthy bottlenecks which bog
down the current manufacturing supply chain.

In terms of strategic acquisitions, ARC plans to take advantage of cross-selling opportunities as

well as purchasing procurement efficiencies, including mass purchasing discounts.

True to its strategy, in June of 2014, ARC acquired Kecy Corporation, a leading precision metal
stamping company utilizing automated manufacturing. Kecys utilization of advantage
technologies provided an opportunity for ARC to accelerate technological adoption and grow
the overall function of the business.

ARC has over 700 employees and sales of nearly $83 million worldwide. The company has
posted a 65% CAGR over the last three years.

Capstone Partners tracks ARCs market activity as we have been impressed by the leading role
the company has taken in developing the next phase of manufacturing and production
standards and we expect that their input will be influential. Look for ARC to be one of the first
initial public companies in an ever-expansive marketplace that is starting to shape the face of
industrial production.

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PRIVATE COMPANY SPOTLIGHT PROFILE

XCENTRIC MOLD & ENGINEERING

Xcentric is a privately owned business and specific information is not publicly available.
However, in Capstones industry coverage activities, we were given the opportunity to meet
With a growing with the companys founding entrepreneurs, Damon Weaver and Brendan Weaver. What we
proprietary technology learned in the meeting was exciting enough for us to highlight Xcentric as a company on the
move and to expect it to out-perform the market.
platform, Xcentric is
recognized as one of the For background purposes, Xcentric was founded in 1996 in Michigan. The company specializes
in offering injection molding, CNC machining and rapid prototyping services for all industries,
top injection molders and
including defense, medical, aerospace, automotive and consumer products markets. What
rapid custom parts impressed us about the companys capabilities is its highly streamlined and proprietary
suppliers in North technologically advanced quotation, engineering and manufacturing process system, enabling it
to produce intricate custom plastic and metal parts with what we believe may be among the
America. industrys fastest lead times for more complex prototypes and production parts. Xcentric
boasts design-to-delivery capabilities in two weeks or less.

Xcentric has the unique ability to produce high quality sophisticated custom parts, something
largely missing from the market. Their advanced molding system is best-of-breed, allowing for
custom colors and designs requiring tight tolerances, intricate geometric complexity and multi-
component assemblies. Their unique interface and technology platform expands the typical
customer reach amongst rapid manufacturers. The company benefits from a diversified
customer base and end markets, while some of Xcentrics rapid manufacturing services may
very well play a role in shaping the future of the industry.

While we cannot disclose specific financial information on the business, Xcentric has posted
top-quartile results in terms of revenue growth rate. In addition, the company has reached
critical scale. While we expect the current meteoric growth rate to ease slightly, we also
anticipate continued efficiencies and impressive profit margins.

In summary, our preliminary thesis on the attributes of this business are as follows:

Innovative leader in the quick-turn manufacturing sector with broad capabilities

Compelling value proposition with injection molding, CNC and additive manufacturing
Proprietary technology platform that serves as a process engine and key differentiator
Impressive and sought after base of loyal product developers and engineers
Business model optimized for low-volume high-margin parts
Strong diversification across both the customer base and industry end markets
Sophisticated and scalable business infrastructure with a proven growth strategy
Viable opportunity to further accelerate growth via web marketing efforts
In a strong position to exploit the favorable industry dynamics

Based on our research, together with other insights from our meeting with the companys
shareholders, Capstone believes Xcentric is deserving of recognition among the industry
leaders. As the industry continues to grow and evolve, we expect Xcentric to be at the
forefront (or at very least in the lead pack).

Capstone Partners LLC 12

 Additive Manufacturing & Rapid Prototyping
Q3 2015

CAPSTONES AMRP INDUSTRY TEAM

John Ferrara, Managing Partner

[email protected] (617) 619-3325
John has spent his entire 25+ year career serving as a trusted advisor to emerging companies and entrepreneurial
business owners. Representative of nearly 200 transactions and related engagements, he has acted in various
capacities, including investment banker, management consultant, interim executive, investor, founder and board
member. John has been recognized as one of the Top 50 M&A advisors in the US and was honored for his lifetime
achievement in the industry as an M&A Advisor Hall of Fame inductee. During his tenure as Managing Partner,
Capstone has expanded from Boston to include eight offices in the US and UK with an international platform that
spans over 450 professionals in 40 countries worldwide. Prior to Capstone, John worked at several global financial
service firms, including Lehman Brothers, Rodman & Renshaw, Deloitte and Arthur Andersen. He completed his
undergraduate studies at Wesleyan University and his MBA work at The Anderson School at UCLA and the London
School of Economics.

Eric Williams, Managing Director

[email protected] (215) 854-4065
Eric serves as Managing Director and Head of the Atlantic Region for Capstone, based out of Philadelphia. Prior to
Capstone, Eric was responsible for managing the Eastern region for Morgan Stanley Smith Barneys Capital
Strategies Group and its predecessor, Citi Capital Strategies. Eric has more than 20 years of experience managing
strategic sale assignments and leveraged recapitalizations for owners of privately held companies. He is head of
Capstones Health & Medical practice and has successfully completed over 100 transactions in sectors including
contract manufacturing, pharmaceutical outsourcing, medical devices and health care services. In 2013, he received
the M&A Deal of the Year M&A Advisor award for his work on the acquisition and majority recapitalization of Invo
HealthCare Associates, Inc. He has also executed complex cross-border transactions with foreign buyers based in
London, Germany, Sweden and Switzerland and has structured deals with leading private equity groups and
strategic corporate buyers. He graduated cum laude from the University of California and is a Series 7 and 63
Registered Securities Representative as well as a Series 24 Registered Securities Principal.

Mark Surowiak, Director

[email protected] (215) 854-4063
Mark is a Director in the Philadelphia office, supporting the management of the Atlantic Region. Previously, Mark
served over 10 years as a senior investment banking professional in Morgan Stanley Smith Barneys Capital
Strategies Group. Over his career, Mark has focused on developing deep credentials and expertise in the sale and
recapitalization of privately held businesses. Mr. Surowiak's experience spans a broad range of industries, including
the consumer products, post-secondary education, government and defense contracting, manufacturing and
outsourced business services sectors. Prior to investment banking, Mark enjoyed a career in the social services field.
Mark is a graduate of Illinois State University with a BS in Business Administration. He is a Series 7 and 63 Registered
Securities Representative.

Capstone Partners LLC 13

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ABOUT CAPSTONE PARTNERS

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