Additive Manufacturing Strategies

3D Printing Financials: Desktop Metal Reports High Revenues, Losses and the Acquisition of ExOne

ST Medical Devices

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It’s only been seven months since Desktop Metal (NYSE: DM) went public. Still, the Massachusetts 3D printing business has already made some massive announcements, including the acquisition of pioneer binder jet 3D printer manufacturer ExOne and Harvard spin-off biotech startup Beacon Bio. Adding to the momentum, on August 11, 2021, Desktop Metal reported second-quarter revenues that surpassed the first quarter of 2021 by 68%, prompting the company to expand and accelerate the adoption of AM 2.0.

Revenue climbed $19 million from $11.3 million in the first quarter of the year, in line with Wall Street expectations, and was up 767% year-over-year. The acceleration was due to an increase in its metal product shipments, specifically production system P-1, Shop System, and Studio System-2, as well as strong contribution from EnvisionTEC, photopolymer products, and consumables.

Graph showing Desktop Metal's revenue in fourth quarter of 2020 and first and second quarter of 2021.

Desktop Metal revenue throughout the last three quarters. Image courtesy of Desktop Metal.

The company saw another acceleration in its customer-installed base, with new customer additions increasing 44% sequentially from the first quarter of 2021. This included strong growth in its metals business. Moreover, the Desktop team is “putting the final touches” on the production system P-50, said CEO Ric Fulop, which is on track to begin shipments in the fourth quarter of 2021. This quarter, a few additions to the material library include cobalt chrome on the Shop System, titanium Ti64 on the Studio System 2, 4140 low alloy steel, and 316L stainless steel on the Production System, and FDA-cleared Flexcera Base Smile for the EnvisionTEC platforms.

On the downside, Desktop Metal was expected to report a loss of around 9 cents per share and posted a loss of 17 cents per share, almost double what analysts had hoped for. For the quarter ending June 2021, the business divulged net losses of $43.2 million, including in-process research and development assets acquired of $10.4 million related to the Beacon Bio acquisition. The mixed quarterly report led to a few ups and downs in the stock price, which opened at $8.95 on August 12, 2021, after the quarterly announcement the previous day, before dwindling to one of the lowest points since the company went public.

Obviously, the earnings report was overshadowed by the biggest news of the day and probably one of the most significant M&As this year—Desktop’s acquisition of ExOne for $575 million. During a call with investors, Fulop invited ExOne CEO John Hartner to discuss his company’s quarterly report, which came out simultaneously. Hartner was excited about the transaction and highlighted that the synergy between the two companies “will solve customers challenges faster and bring the reality of production metal additive forward by years.”

Desktop Metal to acquire ExOne

ExOne’s installed base is approaching 500 systems and an estimated 28 million parts printed across customer sites and adoption centers in the past year. Moreover, the company brought in $32 million in sales for the first half of the year, making this a great opportunity for Desktop Metal to “cement” its leadership in additive manufacturing for mass production, as the CEOs described. In addition, the deal could radically accelerate the adoption of AM for high-volume applications by offering customers more comprehensive solutions, especially across printing of end-use parts in metals and technical ceramics.

“A key element of the transaction is the fact that overnight, we roughly doubled our IP portfolio to well over 600 patents issued or pending, including the largest portfolio of binder jetting IP in the market. We’ve highlighted some of those key patents and capabilities that I think are going to help drive the adoption of AM by customers,” remarked Fulop.

Individual working with 3D Bioplotter from Desktop Metal.

Desktop Metal acquires eardrum-regenerating 3D bioprinting technology. Image courtesy of Desktop Metal.

This is the fifth acquisition for Desktop Metal in 2021, following deals to buy out 3D printer manufacturer EnvisionTEC in January; Adaptive3D, a provider of elastomeric solutions for AM, in May, and in July, Belgian reactor system developer Aerosint and Beacon Bio. The last two additions are early-stage startups with a lot of potential for Desktop’s consumer market. While Aerosint’s technology unlocks an exciting range of new applications for AM, including local optimization and mechanical properties, Beacon Bio focuses on the healthcare segment, which has lately shown great potential for 3D printing applications. Specifically, Beacon Bio’s PhonoGraft biofabrication platform could be a game-changer for individuals who have hearing deficiencies, roughly 30 million people a year globally, enabling 3D printed grafts with the potential to support the bodies’ natural healing and regeneration process.

Halfway through the year, Desktop Metal reports a strong liquidity position with cash, cash equivalents, and short-term investments of $514.5 million as of June 30, 2021. Even though Desktop Metal’s Chief Financial Officer James Haley explained that the company is “burning through cash” as it continues to grow, scale and acquire other businesses, these opportunities are expected to get “outsized returns over the next couple of years.”

As for the full year 2021, Desktop Metal said it projects at least $100 million in revenue, with plans to exit the year with an annualized run rate of approximately $116 million, and expects a continued sequential quarterly growth throughout the third and fourth quarters, capturing double-digit share over the additive manufacturing space throughout the next decade.

Surely, the company will be at least one topic of conversation at the upcoming SmarTech – Stifel AM Investment Strategies 2021 summit on September 9, 2021. The half-day online event focused on 3D printing market activity is free to attend. Register at the summit website here.

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