Digital manufacturing service provider Fast Radius has announced that it intends to go public by merging with the Special Purpose Acquisition Company (SPAC) ECP Environmental Growth Opportunities (NASDAQ: ENNV).
With an estimated value of $995 million, the new enterprise is set to be backed by $445 million in cash proceeds from the transaction, with Fast Radius shareholders enrolling 100% of their equity. Any funding raised via the deal has been earmarked for bankrolling the firm’s ongoing software development and facility expansion strategy, in the hopes of boosting its annual revenue up to $635 million by 2025.
“We are excited to partner with ENNV, as their team’s long track record of success, history of being on the forefront of new sustainable infrastructure transitions, and their institutional reach will accelerate the next chapter of our growth,” said Lou Rassey, CEO of Fast Radius. “Our board and management team remain committed to executing on our proven business model and driving value for all stakeholders.”
Fast Radius’ ambitious goals
Based in Chicago, Fast Radius offers on-demand 3D printing, CNC machining, urethane casting and injection molding services via its proprietary Cloud Manufacturing Platform. Much like the websites of its service provider competitors, the firm’s software allows clients to upload and order parts to specification, via its distributed network of company-owned micro-factories and third-party suppliers.
Over the last three years, Fast Radius has begun to scale its production capabilities, opening a new HQ and raising $48 million in investment, through a funding round led by UPS. Since then, the company has grown its portfolio further, becoming one of the first to install Desktop Metal’s Production System, before launching a ‘DICOM-to-print’ service for its North American clinicians alongside Axial3D.
In anticipation of its upcoming merger with ENNV, the firm has now set its sights on expanding even more, and reaching an EBITDA goal of $135 million and revenue target of $635 million by 2025. However, on a recent call with analysts and investors, Fast Radius’ COO Pat McCusker painted a picture of the company’s financials, that suggests reaching this figure could be a tall order.
While McCusker emphasized that Fast Radius has enjoyed a 100% compound annual growth rate over the past four years, he projected company revenue at $25 million for 2021 and more than $100 million by 2022. To back up the company’s lofty projections, McCusker cited the impact of the firm’s imminent $445 million windfall, as well as a boom in client demand that shows its model is “proven and working.”
Of course, Fast Radius isn’t the only bureau set to go public via a SPAC merger that’s setting optimistic growth targets, as Shapeways recently projected revenue of $250 million by 2024. Despite this, according to McCusker, his firm is unique in that it has built a “digital marketing tech stack,” which allows it to target high-value prospects more measurably and scalably than its competitors.
“We have demonstrated an ability to acquire new customers in a cost-efficient, scalable way,” explained McCusker on the company’s investor call. “These investments are creating real enterprise value as we compare the customer acquisition costs to what we’re seeing across the average customer revenue, production gross margins, customer retention rates and account expansion.”
Cloud manufacturing on NADSAQ
Fast Radius’ merger with ENNV sees it join forces with an electric energy-focused SPAC that has managed over $22 billion in capital since 2005, including four private equity funds. In the past, the firm has made two businesses private, but it now intends to take Fast Radius public, a company which it says “scores well on sustainability and energy efficiency.”
Through their merger, the companies aim to raise $445 million in capital, with $345 million being held in ENNV’s trust account, and a further $100 million coming from a Private Investment in Public Equity (PIPE). Goldman Sachs Account Management has already put $25 million forward towards this PIPE, with other backers set to include UPS, Palantir, ECP and other institutional investors.
As part of the deal, ENNV will be renamed “Fast Radius, Inc.” and is expected to remain listed on the NASDAQ, while the current bureau of the same name will effectively become publicly traded for the first time. Having been approved by the boards of both firms, the transaction is expected to close in Q4 2021, subject to regulatory and stockholder approvals as well as customary closing conditions.
In terms of its spending priorities, Fast Radius says that any capital raised through the deal will be invested in increasing revenue growth through “customer acquisition and software development,” in addition to an expansion of its micro-factory facilities, which should serve to boost its production capacity and ability to meet the needs of a growing client base.
“We look forward to partnering with Lou and his team to accelerate growth as they execute on their proven business model and capitalize on the significant opportunities in the growing custom parts market,” said Doug Kimmelman, Chairman of ENNV. “As a public company, we believe that Fast Radius will be even better positioned to maintain its leadership in the software and industrial technology industry.”
“The Fast Radius Cloud Manufacturing Platform provides a fundamentally more sustainable way to produce and fulfill parts around the world.”
AM’s on-demand SPAC mergers
Over the last year, the number of 3D printing firms going public via SPAC mergers has risen markedly, and these business combination agreements are now worth more than $15 billion. In particular, such deals have become a popular means of conducting IPOs among AM service providers, with Fathom Digital Manufacturing also revealing that it’s going public via a $1.5 billion SPAC merger later in 2021.
However, not all manufacturing bureaus are convinced of the benefits of SPAC mergers, as last month Xometry went public on NASDAQ via a traditional IPO. Even though the company raised the value of its shares shortly before listing them on the exchange, its decision to become publicly listed could still see it net over $290 million in cash proceeds.
Elsewhere in the industry, Formlabs recently raised $150 million in funding taking its value over the $2 billion mark, but its leadership remains reluctant to launch an IPO. Paying lip service to the surge in popularity of SPAC mergers, the firm’s CEO Max Lobovsky has said that while it’s “large enough” to pull off such a move, he would rather it “took its time” to become “an excellent public company” instead.
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Featured image shows four Carbon 3D printers installed inside one of Fast Radius’ micro-factories. Photo via Fast Radius.