Shapeways to press ahead with SPAC merger despite flat Q2 revenue growth

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3D printing service provider Shapeways has revealed that it still intends to complete its upcoming merger with Special Purpose Acquisition Company (SPAC) Galileo Acquisition despite failing to meet revenue expectations during Q2 2021. 

Back in April 2021, when Shapeways unveiled its plans to join forces with Galileo and go public on the NYSE as a $605 million firm, it set an initial revenue target of $44 million for FY 2021. During H1 2021, however, the company has generated just $17.2 million, leaving it a $26.8 million mountain to climb over the second half of the year. 

While Shapeways’ income in Q2 2021 did rise 26% compared to the $7 million it generated during Q2 2020, it was also completely flat against the $8.8 million reported in Q1 2021. As a result, there’s little in the firm’s H1 financials to suggest that it’s on course to grow and meet its overall revenue goal by the end of the year. Despite this, the company’s CEO Greg Kress continues to claim the opposite is true.

“We are pleased with our second quarter results that show continued momentum in Shapeways’ end-to-end digital manufacturing platform, powered by our purpose-built proprietary software,” said Kress. “The results of the first six months of 2021 have reinforced our confidence in our ability to deliver on our growth plans.”

A Shapeways sign from inside its New York warehouse.
Shapeways’ merger with Galileo Acquisition has been delayed and is now expected to take place in Q3 2021. Photo via Gizmodo.

Shapeways’ Q2 2021 financials 

Given that Shapeways hasn’t gone public just yet, it’s not obliged to publish its financials in the same level of detail as publicly-listed companies are. The firm’s earlier figures haven’t been released in full either, thus it’s difficult to fully-analyze its financial performance, but based on revenue alone, it’s clear that Shapeways is falling short of expectations. 

As part of an investor presentation during April 2021, Shapeways revealed that it generated $33.5 million during the last full pre-COVID year of 2019. Therefore, if the firm were to continue bringing in revenue at its current rate for the next two quarters, it’d be left with an income of $35.2 million for FY 2021, representing an increase of only 5% on FY 2019, and some $8.8 million less than its $44 million goal. 

Although the company’s financials also show that its gross profit actually increased by 39% between Q2 2020 and Q2 2021, these figures don’t necessarily correlate with a rise in total income. For its part, Shapeways has said that once its merger with Galileo is complete, it’ll use some of the $195 million net proceeds raised from the deal to fund its future revenue growth, but that’s by no means guaranteed. 

Shapeways’ Projections ($)FY 2019 FY 2020 FY 2021FY 2022FY 2023FY 2024
Revenue 33.5m31.8m44m86m150m250m
YoY Growth (%) -5+38+95+74+67

The company now operates in a highly-competitive sector, with the likes of Xometry, Hubs and Protolabs competing for similar clientele, thus its ramped up spending won’t necessarily yield higher income. What’s more, the firm has already raised more than $100 million in funding, but its limited financial statements from previous years do little to indicate where this may have been redeployed.

In April, for instance, Shapeways published its balance sheets from FY 2020, which showed that it had just $948,000 in property and equipment by the end of the year. Given that the firm’s leadership hasn’t changed since its last round of investments, there’s therefore nothing to say that its upcoming $195 million windfall will now be spent any differently, and that it will be reflected in its future financial statements. 

When contacted by 3D Printing Industry earlier this year, Shapeways was unable to provide specific financial details on the period in question, but did add that it believes its imminent funding will allow it to “unlock new industries” and “capitalize on favorable market tailwinds,” while its leadership has the “industry expertise to propel the company forward.”

A range of components that were 3D printed using Shapeways' existing online platform. Image via Shapeways.
Shapeways will need to generate $26.8 million to meet its revenue goal in H2 2021. Image via Shapeways.

On-track for Q3 completion 

Alongside the publication of its Q2 2021 results, Shapeways has also revealed that its merger with Galileo is now expected to take place by the end of Q3 2021, rather than the “summer” date initially planned. Although the firm hasn’t provided any insight into why the deal has been delayed, it has announced that in August, Galileo filed a second amendment to its merger registration statement with the SEC. 

In effect, the move has seen it issue a revised prospectus for its proposed combination with Shapeways, but there’s nothing to indicate that its completion is in doubt. That being said, Galileo’s acquisition agreement has a deadline of October 22, 2021, thus it now faces a race against the clock to get the deal wrapped up, as its sponsors risk losing their entire investment should it not be completed on time. 

This is due to the fact that the merger isn’t being underwritten by an independent third-party, so Galileo’s investors would not benefit from an outside review if things went south, and the SEC registration itself directly references these risks.

“The amount of due diligence conducted by Galileo and its advisors in connection with the business combination may not be as high as would have been undertaken by an underwriter,” reads the statement. “It’s possible that defects in Shapeways’ business, or problems with its management that would have been discovered if Shapeways conducted an underwritten public offering, will not be discovered, which could adversely affect the market price of the combined company.”

Despite the apparent risks on both sides, the two companies appear to be intent on pressing ahead with their proposed merger during Q3 2021. According to Kress, the move still has the potential to turn Shapeways’ financial fortunes around, providing it with the funding needed to address new markets with its service offering, and expand on its product portfolio. 

“Our ongoing focus is on building scale as we work with our customers and extend our penetration across the industrial, medical, automotive and aerospace segments,” added Kress. “We look forward to finalizing the merger transaction with Galileo and continuing to accelerate product innovation and expand customer adoption.”

CRP's 3D printing technology has been utilized within a range of applications, varying from motorsport to aerospace (pictured). Image via Alba Orbital.
Like Shapeways, Rocket Lab is also waiting to complete its SPAC merger, which was due to take place in Q2 2021. Image via Alba Orbital.

3D printing’s SPACs-in waiting 

Since Desktop Metal went public on the NYSE in December 2020, a string of other high-profile SPAC mergers have been announced, but not all of them have yet come to fruition. One company that has finalized its SPAC merger, is Markforged, which went public on the NYSE in July 2021, in a deal that saw it raise $361 million. 

Elsewhere, aerospace firm Rocket Lab hasn’t managed to go public yet, despite announcing plans to merge with SPAC Vector Acquisition in Q2 2021. Once completed, the deal is eventually set to provide the combined company, which will become listed on Nasdaq under ‘RKLB,’ with around $750 million in funding. 

3D printer manufacturer VELO3D is also in the process of finalizing its merger with SPAC Jaws Spitfire Acquisition, although publicly at least, the deal remains on course for completion in H2 2021. The resulting business is expected to be valued at $1.6 billion on the NYSE, with the firm raising approximately $500 million via its IPO. 

The nominations for the 2021 3D Printing Industry Awards are now open. Who do you think should make the shortlists for this year’s show? Have your say now. 

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Featured image shows a range of parts that were 3D printed via Shapeways’ online platform. Image via Shapeways.