Fathom Appoints New CEO During Challenging Financial Environment


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In a move signaling a strategic shift for the company, Fathom Digital Manufacturing Corp. (NYSE: FATH) announced the appointment of Carey Chen as the new Chief Executive Officer, succeeding Ryan Martin, effective immediately. Carey Chen has a distinguished career in global manufacturing and has been a part of Fathom’s Board of Directors since it became publicly listed in 2021.

Carey Chen brings substantial industry experience to his new role. Prior to Fathom, Chen served as the President of Altix Corporation and as the CEO of Cadrex Manufacturing Solutions and Incodema Holdings LLC. He also held the role of Executive Chairman and President at Cincinnati Incorporated, where he led the launch of the Big Area Additive Manufacturing system, the world’s largest 3D printer at that time. He also served on the Board of Directors of New Valence Robotics Corporation (NVBots) and its metal 3D printing spinout, Digital Alloys, Inc.

Context: Fathom’s Journey

Fathom has seen a remarkable transformation since its origins 35 years ago as Midwest Composite Technologies. After several acquisitions and restructuring under CORE Industrial Partners, it evolved into one of North America’s largest digital manufacturing bureaus. In an interview with 3DPrint.com, Ryan Martin, the outgoing CEO, described a fragmented industry and how Fathom aims to serve as a consolidated service bureau to meet the diverse manufacturing needs of enterprise customers.

Ryan Martin at Fathom's manufacturing facility.

Outgoing Fathom Manufacturing CEO Ryan Martin at the company’s headquarters in Hartland. Image courtesy of Fathom Manufacturing.

Despite a consolidation strategy now being pursued by a number of other private equity firms, FATHOM was among the last to go public via SPAC during an economic downturn and as SPACs fell out of favor with investors. In turn, the financial results for Fathom for the second quarter and first half of 2023 indicate a challenging period for the company.

Financial Turbulence

For the first half of 2023, Fathom’s revenue dropped to $69.5 million, down from $82.5 million during the same timeframe in the previous year. This decline was largely due to lower production volumes, influenced by a softer macroeconomic environment. On the profitability front, the company had posted a net loss of $(8.6) million, and when adjusted for certain non-operating expenses, the net loss had been $(11.2) million.

Despite facing these challenges, Fathom generated a positive Adjusted EBITDA of $8.9 million, albeit with a reduced margin of 12.8% compared to the previous year. This suggests that the company retained some level of operational profitability, even though it had decreased. Among Fathom’s various product lines, precision sheet metal faced the most significant challenges, with a 31.1% decline in revenue. In contrast, CNC machining was less affected, experiencing a smaller 9.2% drop in revenue.

The company has seen a steady increase in total revenue year-over-year, though gross profit saw a dip in 2022 before recovering in the trailing twelve-month (TTM) period after. The company swung from a net income in 2021 to significant net losses in 2022 and the TTM period. Operating expenses have increased over the years, and the company has posted an operating loss in the TTM and 2022 periods, suggesting that it needs to control its operational costs. The EPS figures also confirm the volatile profitability, swinging from a small positive in 2021 to a significant negative in 2022.

Stock Splits

Since it began trading publicly in 2021, Fathom’s stock began with an over-inflated value of $197.4 before plummeting to a value near $3.335. Throughout that time, it was volatile, particularly from September 2021 to April 2022 before flatlining. It is now at one of its lowest points in its entire trading period.

In September, Fathom performed a reverse stock split to consolidate every 20 shares of the company’s common stock into a single share, effectively reducing the total number of shares from about 70.1 million to around 3.5 million in order to increase the per-share market price to meet the NYSE’s minimum $1.00 average closing price requirement for continued listing.

With this in mind, it’s no surprise then that the Fathom board sought a new CEO. Fathom seems to be taking steps to address its challenges and possibly steer its course towards a more positive direction. With a background at GE Additive, Martin should be able to land at another firm in the 3D printing industry, or in manufacturing at large.

Fathom’s Future

Of course, it’s difficult to determine what’s going on at Fathom from the inside, in terms of proper management and financial decision making. However, from the outside, the company seems to have a solid business model.

Fathom's manufacturing facility filled with 3D printing platforms.

Fathom Manufacturing Facility at Hartland, Wis. Headquarters. Image courtesy of Fathom.

Traditionally, 3D printing service bureaus have had a difficult time maintaining profitability, but, as firms like Proto Labs have demonstrated, it is possible to survive in the service manufacturing space as long as the offerings are diversified. That is definitely the case for Fathom, which has just about every AM technology but also a number of traditional production technologies.

In addition to backing from private equity, in the form of CORE Industrial Partners, Fathom has had a long history of being a prominent service provider. It also boasts ISO 9001:2015 and AS9100 Rev. D certifications, ITAR Registration, and NIST 800-171 compliance, meaning that it is aligned with the global trend of governments and militaries adopting digital manufacturing to fulfill supply chain resilience and sustainability efforts.

All of this is to say that Fathom may have just decided to execute a SPAC IPO at the wrong time and could very well weather this financial environment. According to “The Market for Metal Additive Manufacturing Services: 2023-2031” report from Additive Manufacturing Research (formerly SmarTech Analysis), metal AM services could reach $16.1 billion by 2031. If Fathom is able to stabilize its course, it may in a prime position to take advantage of that growing market segment.

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