Correction 4/8/24: A previous version of this story incorrectly speculated that Fathom would merge with CORE portfolio company UPTIVE. The article has been updated to remove that reference.
As discussed in previous articles, 3D printing service bureau Fathom Digital Manufacturing is in the midst of a restructuring in response to its financial challenges illustrated in the public market. A series of filings with the U.S. Securities and Exchange Commission (SEC) has partially elucidated what the next step is for the firm, including a merger with an “affiliate of CORE Industrial Partners LLC,” the private equity group which backs it.
After going public via SPAC merger in 2021, Fathom has faced financial hardships as the larger economy slowed down. At the end of 2023, the firm replaced its CEO before CORE offered to acquire the company. Now, in a Form 8-K filed on April 2, 2024, the company has disclosed an upcoming merger, but not with which entity. While this author previously believe that Fathom could join UPTIVE—in many ways, the privately held version of Fathom—the Form 8-K actually makes it clear that Fathom Digital Manufacturing Corporation and its subsidiary, Fathom Hodco, LLC, are to be merged with Fathom Digital Manufacturing Intermediate, LLC, Fathom Digital Manufacturing Merger Sub, Inc. and Fathom Digital Manufacturing Merger Sub 2, LLC, all of which are affiliates of CORE Industrial Partners, LLC.
Fathom Manufacturing Facility at Hartland, Wis. Headquarters. Image courtesy of Fathom.
Details of the merger were complemented by a Schedule 13D amendment filed by CORE that underscored the private equity group’s increased influence over Fathom. According to the document, CORE is providing an unsecured term loan of up to $2.5 million. This financial injection, earmarked for working capital, is meant to provide the necessary liquidity for Fathom’s operations as it undergoes the transition to a new company.
The news comes as Fathom also filed an SEC Form 12b-25, indicating Fathom’s delay in submitting its annual report for the year ending December 31, 2023. The deferment is attributed to the time needed to finalize and review its consolidated financial statements. The form states:
“Fathom Digital Manufacturing Corporation (the ‘Company’) is unable to timely file with the Securities and Exchange Commission (the ‘SEC’) its Annual Report on Form 10-K for the year ended December 31, 2023 (the ‘2023 Form 10-K’) by the prescribed due date without unreasonable effort or expense. The Company requires additional time to finalize and review its consolidated financial statements due to the resources required in connection with the execution and performance of the agreements relating to the Company’s pending merger transaction with affiliate of CORE Industrial Partners LLC announced on a Form 8-K filed on February 20, 2024.”
The disclosed financial metrics for 2023 painted a picture of a company responding to the adversities of a tough economic climate. Fathom reported a downturn in revenue and gross profit, mainly due to the soft market conditions affecting its core product lines such as precision sheet metal, CNC, injection molding, and additive products. Despite these challenges, Fathom managed to reduce its selling, general, and administrative expenses, highlighting efforts to streamline operations and reduce costs amid revenue pressures.
As CORE began establishing AM roll-up operations—which included 3D printer and materials manufacturer 3DXTECH—it was difficult to determine exactly why he had established two service bureaus, Fathom and UPTIVE. As hinted at in an article by 3DPrint.com Macro Analyst Matt Kremenetsky, it may be that the private equity business was hedging its bets with regard to the future of the general economic environment. In the case the economy continued to rebound from COVID, Fathom could have stood to gain from the traction. However, in the actual course of events, UPTIVE could withstand the downturn without the need to answer to a large pool of public investors.
Before the SPAC IPO, Fathom was well regarded in the industry, a sentiment that likely hasn’t changed outside of financial performance. With a large network of digital manufacturing suppliers and high-profile clientele, the firm still has strong potential, regardless of what direction CORE takes it in. T