Despite a 907% revenue growth year-on-year, metal 3D printing mass production leader Desktop Metal (NYSE: DM) took a hit after posting its third-quarter earnings report on November 15, 2021. As a result, the company saw its shares drop to their lowest point since going public in December 2020, trading at $6.52 by midday the day after publishing its financial performance. The revenue results were mainly overshadowed by a worse-than-expected net loss of $66.9 million, including $15.2 million of in-process research and development assets related to acquisitions. This last quarter, the company disclosed the purchase of ExOne, Meta Additive, and Aidro, adding to its expansion strategy across both organic product development and M&A activities.
Desktop Metal reported revenues of $25.4 million for its third fiscal quarter ended September 30, up 34% sequentially from the previous quarter of 2021 and impressively up 907% from a year ago, when the pandemic was in full force, and related lockdown measures resulted in supply chain disruptions worldwide.
Driven by a combination of solid performance in the brand’s core metals business and contributions from recent acquisitions, Desktop Metal’s CEO Ric Fulop said during an earnings call with investors that he expects several developments in the business this quarter. Particularly in commercial opportunities with several Fortune 500 firms across the company’s volume production platforms, including its flagship P-50 metal 3D printer, for which the company is engaged in final procurement and assembly of initial builds targeted for shipment in the last quarter of 2021.
Most notably, however, was the company’s net loss of $66.9 million, or 26 cents per share, up 244% from the third quarter in 2020, when net losses were $19.5 million or 12 cents per share. As a result, the company’s stock fell 15% the day after the earnings announcement and continued to fall throughout the day until stabilizing at $6.83 by market closing. In June 2021, Desktop Metal had a valuation of $3 billion, but today market cap is at $2.11 billion.
Eager to expand its product portfolio, Desktop Metal announced the successful closure of its ExOne acquisition for $561.3 million, reinforcing leadership in additive manufacturing for mass production.
Fulop had this to say about the deal: “Together, we offer an unparalleled product portfolio across speed, costs, resolution, and part size, and we are particularly thrilled with the opportunity to combine ExOne’s sand printing expertise with our low-cost architectures to make digital casting more accessible and grow that market. Our combined material size efforts will allow us to introduce new materials to our customers at a faster rate. We look forward to leveraging our complementary go-to-market activities to drive outsized growth while seizing on opportunities to flip ExOne’s business to a more turnkey built to forecast model which we believe will accelerate growth in the conversion of ExOne robust backlog, which is set at $57 million at the end of Q3.”
The company also announced two other smaller transactions, the acquisition of Meta Additive, a University of Liverpool spin-off company that is developing next-generation functional binder technology, and acquired Aidro, an Italian producer of hydraulic and fluid power systems.
Meta Additive has developed non-sacrificial binders that use organometallics and particles of functional build material to bind and infiltrate the powder bed simultaneously during the binder jetting process. According to Fulop, this binder IP can revolutionize binder jetting by extending the technology to markets that require larger part sizes in a broader palette of materials, with faster turnaround times. Overall, the new addition will run up next-generation functional binder technology focused on reducing shrinkage during sintering.
As for Acquired Aidro, it will drive AM design and high-volume production capabilities for next-generation manifolds, hydraulics, and fluid power systems. Aidro was an early adopter of AM and has world-class design expertise and know-how. The objective is to leverage a combination of Desktop Metal’s and ExOne script platforms to produce Fluid Power Systems and manifolds optimized for AM.
Other highlights from the financial report include a newly launched initiative under Desktop Health (the recently launched healthcare business within Desktop Metal) to develop a dental and biofabrication parts platform with 3D printing at its core, including completing initial acquisitions towards this strategy. In addition, Fulop emphasized the need to “attack these markets” and become the leading force in print platforms or mass production that use area-wide technologies and vertically integrate into high-margin consumable revenue streams by owning a broad materials portfolio with best-in-class properties.
Along these lines, the company is also focused on developing killer apps for additive, particularly for dental and biofabrication, mainly because 3D printed parts are unique to each patient. By launching a new parts platform to vertically integrate design and parts production capabilities that will allow Desktop Metal to provide a more comprehensive, end-to-end offering, can help accelerate the adoption of 3D printing and dental and biofabrication. For dental specifically, these efforts are critical to make chairside printing successful at scale and drive value creation for the company.
Like many other companies, the global supply chain and logistics network presented challenges, remarked Desktop Metal Chief Financial Officer (CFO) James Haley. While third-quarter revenue growth was less robust than previous quarters, the company expects a return to growth expectations in the fourth quarter. The full-year 2021 outlook anticipates total revenue in the range of $92 to $102 million, representing between 459% and 519% growth over the prior year. This updated revenue range includes between $36 to $46 million in expected fourth-quarter 2021 revenue, implying 43% to 82% sequential growth over the third quarter of 2021.
“I’d like to reiterate our vision of accelerating adoption of Additive Manufacturing 2.0 on our way to achieving a double-digit share of the additive market by the end of this decade. As we near the end of 2021, we’re probably better positioned with the right portfolio of differentiated additive manufacturing solutions to drive consistent growth through 2022 and over the long term. I remain as excited as ever about the momentum of our business and our opportunity to deliver value to all of our stakeholders,” concluded Fulop.
The Massachusetts-based 3D printer manufacturer will showcase many of its innovative products at this week’s Formnext 2021 event in Frankfurt, Germany, in booth E58, Hall 12.0.
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