To confront the larger economic downturn taking place globally, the U.S. Federal Reserve has increased interest rates as a means of tamping down on skyrocketing inflation. Among those feeling the pain of the recession is 3D printing service bureau Fast Radius (Nasdaq: FSRD), which just announced that it has filed for Chapter 11 Bankruptcy. DLA Piper LLP is acting as legal advisor, while Lincoln International is its investment banker, and Alvarez & Marsal is its financial advisor.
From 3D Printing Hub to IPO
A large user of Carbon digital light processing (DLP) and HP multi jet fusion (MJF) 3D printers, Fast Radius was established in 2014 with the unique model of situating itself at a UPS shipping and logistics facility in Louisville, Kentucky. This would provide it with a hub from which it could ship parts around the world, initiating the idea of 3D printing as a critical component of supply chain maintenance.
By February 2022, Fast Radius only had about $8 million in cash on the books when it began trading on the Nasdaq after a merger with ECP Environmental Growth Opportunities Corp. This gave the firm an influx of some $70 million. Unfortunately, the IPO came during the onset of a global recession and growing skepticism of SPACs.
Fast Radius Files for Bankruptcy
Throughout 2022, 3DPrint.com covered a scourge of layoffs that occurred throughout the additive manufacturing (AM) industry. We’ve seen worker displacement take place at Desktop Metal (NYSE: DM), Carbon, and Nexa3D. Photocopying pioneer Xerox (Nasdaq: XRX) essentially dismantled its entire AM division.
Alongside other businesses in its cohort, Fast Radius laid off 20 percent of its workforce in June 2022. It then cut 38 more people just this month. The company told 3DPrint.com in a statement:
“Unfortunately, Fast Radius can confirm that 38 employees, or approximately 17% of our total workforce, have been informed of the elimination of their positions within the company. We regret the impact this has on our employees and their families and are providing severance packages to those affected. This move, while difficult, will further improve the company’s current cash position in a challenging economic environment.”
The move came as the Chicago-based firm began “an in-court process to effectuate one or more strategic transactions and has filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the District of Delaware.” Fast Radius asked the court to initiate “sale and marketing procedures,” including a bid deadline of December 5, 2022. Additionally, the firm is involved in “active discussions with one or more potential partners and continues to explore and evaluate strategic alternatives.”
“Fast Radius has invested over $200 million creating a first-of-its-kind Cloud Manufacturing Platform. Like cloud computing, we provide a platform of software tools and manufacturing solutions to help engineers design and make commercial grade parts for a $360 billion market. We have served over 2,000 manufacturing customers and 23,000 software users since 2020,” said Lou Rassey, CEO and Co-Founder of Fast Radius. “We thank our suppliers and partners for their continued support through this process. We also thank our team members for their continued commitment and dedication to serving our customers.”
Rescuing Fast Radius?
All of this suggests that Fast Radius is in a rush to find a buyer in the next month. The current financial climate, as 3DPrint.com Executive Editor Joris Peel argued, is poor for struggling startups and ideal for larger, hungrier firms. The one silver lining for laid off employees is the fact that the job displacement is not a reflection of their skills or performance.
Fast Radius will be a fascinating case study regarding how a company in the AM sector does—or doesn’t—bounce back from difficult times. While every firm has its own unique story, the American tech sector’s shifting landscape right now suggests that Fast Radius isn’t the only startup with its back against the financial wall.
In that case, the rest of the sector will likely be watching closely to see 1) what financial interests are willing to come to Fast Radius’s rescue, and 2) what those interests will require in return for their assistance. An important point to keep in mind is that—regardless of the monthly ins and outs of economic forecasts, inflation fluctuations, and consumer spending data—real, physical things are not getting less valuable. This alone hints at how favorable a position buyers could find themselves in over the next year, as startups with promising business plans but little extra cash find their fiscal predicaments to be more and more urgent. One advantage that corporate giants do still have is that they’re sitting on record amounts of cash. As they head into 2023, they’re likely all devising intricate plans concerning which companies they’ll throw life preservers to.
Who Will Buy Fast Radius?
Who might a possible buyer or investor be? A logical assumption would be CORE Industrial Partners and FATHOM (NYSE: FATH), which have been consolidating digital manufacturing bureaus across the U.S. and have a base in the Midwest. Other reasonable considerations are Proto Labs (NYSE: PRLB) and GKN, both of which have the clout, overlapping AM technologies, and a history of acquisitions in the space. It would potentially be easy for all three of these service bureaus to integrate Fast Radius into their operations.
All of these firms boast their proprietary software and workflows for managing, printing, and post-processing orders. Therefore, a logistics software giant like SAP could be a contender, particularly given its previous project with UPS. Contract manufacturers like Jabil would be worth considering as well.
Alternatively, BASF could invest in or purchase Fast Radius. After all, the German chemical giant acquired Sculpteo, invested in Materialise, and partnered with Shapeways. It also offers 3D printing of spare parts via Replique. Another service bureau would open up more material users in the U.S.
Because Fast Radius is a Carbon and HP user, it’s worth considering the possibility that an original equipment manager (OEM) would buy the company to add a service bureau to its portfolio. Who that buyer would be is hard to say because Carbon doesn’t seem to be in a place to acquire Fast Radius without its own financial assistance, possibly from one of its own investors. HP has its own service bureau network, suggesting that owning one outright isn’t its chosen business model.
It wouldn’t seem to fit into the purview of 3D Systems, which already sold its own service unit, or Stratasys, since it manufactures its own technology that competes directly with Carbon and HP products.
Will UPS Save Fast Radius?
Finally, we might consider UPS, Fast Radius’s original partner. In addition to being a major investor in Fast Radius, the shipping giant collaborated with other firms to 3D print goods at UPS stores. Given the fact that shipping containers are stranded along coastlines and supply chains seem to be indefinitely strangled, now may be the time that the company is ready to jump fully into the industry.
Considering Fast Radius’s ties to UPS, the company could end up being deployed as an experiment in operational resilience by a corporation more in need than just about any other on the planet of additional new supply chain management tools. Among all of the other problems plaguing UPS, the shipping and logistics giant simply needs to stop carrying so many packages that end up getting returned. Although it may seem like a far-fetched connection, it could be one of the links in global commerce with the most to gain from production on-demand.
In the Meantime…
While it seeks salvage, Fast Radius believes its stock will be delisted from the Nasdaq and may be moved to the OTC Bulletin Board or Pink Sheets. However, this cannot be assured nor will the company guarantee that such trading will be maintained.
Under Chapter 11, Fast Radius will operate as a “debtor-in-possession,” as the company requests the ability to use cash on hand and operating cash flows to support operations, including paying the remaining employees wages and benefits. It will also continue to pay suppliers and vendors in full under existing terms. Fast Radius believes it will continue to operate normally without interruption.
“Every year since our founding, Fast Radius has grown our revenue, expanded our customer base, and extended our service offerings. However, recent headwinds in the capital markets have inhibited our ability to adequately put in place the capital structure needed,” shared Rassey. “Our Board has deemed this filing an appropriate next step. We continue to have conviction on the importance of innovation in manufacturing and the potential for our Cloud Manufacturing Platform.”
Fast Radius will not be holding its Q3 2022 quarterly earnings call.
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