AM Investment Strategies
AMS Spring 2023

Desktop Metal CEO Weighs in Weathering the 3D Printing Industry’s Financial Turbulence

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After a year of rapid growth, consolidation, and mergers with special purpose acquisition companies (SPAC), the additive manufacturing (AM) industry is now undergoing some financial tumult. Several firms that were boosted during this time have contracted. In turn, we’ve seen layoffs at companies like Fast Radius, Nexa 3D, and Desktop Metal. This last firm is notable for a number of reasons, not only including the fact that it seemingly kicked off the SPAC boom of 2021, but because it represents a new generation of 3D printing firms that seek to upend the industry entirely.

To learn about the company’s strategy amid this economic uncertainty, we spoke to CEO Ric Fulop who was able to describe how Desktop Metal (NYSE: DM) has survived the current economic situation and is poised for continued explosive growth.

Cost Restructuring

In June, Desktop Metal announced that it would lay off 12 percent of its staff as a part of broader integration of its acquisitions from the previous year. At the time, Fulop called it a “strategic integration and cost optimization initiative.” In our interview, Fulop elaborated:

“During COVID, we went from about 250 to 180 employees. We’re at over 1,200 people today. Sometimes you have to adjust. The goal for DM is to accelerate our time to profitability.”

When asked if there were specific divisions that were cut, Fulop clarified that the staff reductions were performed across the board, with the exception of customer service and the go-to-market team. This was particularly necessary for eliminating redundancy from the acquisitions that were performed.

“I’m trying to get the company profitable. Otherwise, people wouldn’t have like a long-term future with us, right? We want to have a healthy company. We’re growing faster the vast majority of our competitors and we just want to be in a good place so that we can build a great, long-term business that’s sustainable,” Fulop said.

Fulop’s claim that the company is growing at a rapid pace is not an understatement. In the past quarter, it expanded by 200 percent compared to the previous year, with a record Q2 of $57.7 million. Fulop’s plan is to break even (on an adjusted EBITDA basis) before the end of 2023. This includes removing about $100 million in costs from the business over the course of the next two years.

As mentioned in the company’s Q2 earnings call, this won’t come from subsequent cost restructuring but based on the current run rate of the company, combined with further integration activities. Desktop Metal went from $16 million to $112 million in total revenue in 2021. By the end of 2022, the firm believes it will achieve some $260 million in revenues.

A Unique 3D Printing Portfolio

It’s worth noting that, despite the current recession and the hardships faced by other 3D printing firms, Desktop Metal is a different beast. While smaller firms may have suffered after their SPAC deals and DM is experiencing the same tumult of the larger economic market, it has a technological portfolio unlike the rest.

This includes the digital light processing (DLP) of EnvisionTEC and the metal binder jetting of ExOne, combined with Desktop Metal’s own metal binder jet innovations and some other acquisitions. Fulop explained that what unites the disparate processes of DLP and metal binder jetting is the fact that they both advance at the exponential rate of Moore’s Law.

“You can get higher inkjet density and higher firing frequency with each generation of binder jetting technology,” Fulop said. “You’re really scaling at the speed at which you improve inkjet systems, which doubles in every 18 to 24 months.”


He added that this is compounded with the use of Desktop Metal’s proprietary single pass jetting (SPJ) technique. This combines the deposition, spreading, and compacting of powder and the jetting of binder material in a single operation, achieving a potential speed improvement of 100 times compared to traditional metal 3D printing systems.

“Then, on the DLP side, you’ve got area-wide photopolymerization, where the solid-state diodes that perform the polymerization are improving at a reasonable rate. And the resolution of the chips increases, as well. Multiplexing that, you basically get a curve that is scaling with performance every year,” he added.

With these developments in mind, Desktop Metal has focused on those two segments. Through the acquisition of binder jetting pioneer ExOne, it consolidated the binder jet space and now controls about 90 percent of the market. The purchase of EnvisionTEC, the company was able to obtain all of the core DLP 3D printing patents, giving Desktop Metal a whopping 650 patents (and pending patents) in total.

Top-down DLP 3D printing on the Xtreme 8K 3D printer from ETEC. Image courtesy of Desktop Metal.

“Our strategy is to have a holistic portfolio with more binders and more qualified materials than anybody else,” Fulop said. “And one huge advantage of our transaction with ExOne is that we give our customers dual sourcing on the metal because we went out there and qualified somebody with 316L [stainless steel] and ExOne qualified somebody with 316L. Now, customers get the ability to have two materials that are qualified when they buy a machine. That makes the products more competitive for customers. That is one of the major advantages of combining the two business: you end up with the ability to make your end product more cost efficient.”

Beyond ExOne and EnvisionTEC

Desktop Metal began expanding these core technologies through the consolidation of smaller, innovative startups in the industry. For instance, EnvisionTEC, rebranded as ETEC, was augmented with the acquisition of Adaptive3D, which makes resins that can be polymerized without the need for photoinitiators. This makes it possible to avoid the use of acrylics, which dominate the market but are notoriously prone to degradation over time due to exposure to moisture and other environmental factors. In contrast, Adaptive3D’s Photo Polymerization-induced Phase Separation makes it possible to produce parts that can survive use in harsh environments for long periods of time.

Desktop Metal then announced the development of FreeFoam, a family of resins that enables the 3D printing of closed-cell foam parts without tooling. Activated by heat, FreeFoam components can expand between two and seven times their original size. 3D printable with ETEC Xtreme 8K top-down DLP systems, the material won a sub-contract under the Defense Logistics Agency (DLA) of the Department of Defense that could be worth up to $15 million.

With the purchase of Aidro, Desktop Metal was able to build up its application-specific expertise. The company primarily relied on metal powder bed fusion (PBF) until the acquisition, applying the technology to the production of complex, optimized hydraulic parts across a wide range of industries and uses.

The prior emphasis on PBF would suggest that DM’s interest was not primarily in the business for cross-selling its own binder jetting systems, but in the value that can be achieved in the services market. Naturally, Aidro will find unique use cases for metal binder jetting of hydraulic parts, but this raises the question of whether Desktop Metal has its eyes on PBF in the long-term.

Surviving the Storm

Whereas the attention that COVID-19 brought to the AM sector as offering potential solutions to supply chain disruptions led to increased investment in the industry overall, the recession that has occurred since has left many of those businesses floundering. However, as 3DPrint.com Executive Editor Joris Peels noted, those that are able to withstand the current market conditions will be the ones acquiring the rest. In this case, Desktop Metal seems poised to be one of the big fish.

Even compared to stalwarts like Stratasys and 3D Systems, which now have among the most diverse technology portfolios on the market, DM’s organic growth is astounding. These predecessors have expanded at a much flatter pace. In contrast, Desktop Metal is achieving triple-digit growth year over year. It also has a higher R&D budget, despite being a smaller company.

Desktop Metal is the dominant player in printed castings, through ExOne, and it has the market share in 3D printed hydraulics, via Aidro. It is also a prominent player in healthcare, with EnvisionTEC’s history in class-two medical device parts. However, it isn’t just the acquisitions that are driving the firm forward. The company’s Shop System is the best-selling product in its category and large companies are purchasing multiple rounds of machines from Desktop Metal and the brands it purchased. For instance, Kimura has 10 systems, while Eaton, Saudi Aramco, and Kennametal also have multiple machines.

Desktop Metal CEO Ric Fulop.

Desktop Metal CEO Ric Fulop. Image courtesy of Desktop Metal.

As the AM industry undergoes another stage in its development, we’ll likely see which firms are set to sink or swim. Will we see a replay of the consumer 3D printing bubble that took place nearly a decade ago, with some firms growing too quickly via acquisitions that they ultimately have to sell? Possibly, but Desktop Metal may have the business portfolio, acumen, and leadership to avoid such a fate.

“We have been very careful integrating these businesses and, if anything, we took some time from the time we acquired to the time we started addressing some of the operational efficiencies because we wanted to make sure we didn’t screw it up. I’ve been an investor before. I was the original backer or Protolabs, Markforged, Onshape and a number of other companies. I’ve seen people screw up and I’ve screwed up myself. So, we’re trying to make sure that we do our best. We have good people on our board, like Steve Nigro, who was the president of HP, and [former CEO of GE] Jeff Immelt. We have good governance at the company and we’re careful. We’re not going to get everything right, but I think we’re doing our best to build a sustainable long-term business,” Fulop concluded.

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