3D Printing Financials: Desktop Metal’s Earnings Dip Amid Nano Dimension Buyout

In the middle of being acquired by Nano Dimension (Nasdaq: NNDM), Desktop Metal (NYSE: DM) shared its second-quarter 2024 earnings, revealing a challenging financial period. The company reported a revenue of $38.9 million, down 27% from $53.3 million for the same period last year and a net loss of $103.4 million. Despite these challenges, the company registered an improved adjusted EBITDA at negative $13.2 million compared to negative $15 million in the same quarter of 2023, suggesting it is reducing its losses and moving closer to profitability.

Desktop Metal’s operating expenses increased to $69.1 million, mainly due to faster amortization and depreciation of certain assets. However, ongoing cost reduction efforts have been vital to the company’s strategy, helping to align its operations with current macroeconomic conditions. During an earnings call with investors, Desktop Metal CEO Ric Fulop said the executive team had to “make hard decisions about our business” to reduce the non-GAAP operating expenses by 48% since the first quarter of 2022 while “meaningfully strengthening our non-GAAP gross margins.”

“By the end of Q1, we had delivered nine quarters of operating expense reduction and brought our cash burn down dramatically. We have strategically realigned our business to reflect a lower growth environment driven by 11 interest rate hikes, and from a margin perspective, I’m proud of the progress we have shown,” the executive expressed.

Desktop Metal goes public.

Despite these efforts, the company has faced an increasingly challenging business environment due to rising interest rates and slowing capital expenditure budgets. While Fulop noted that additive manufacturing (AM) has incredible potential and will continue to grow over the next decade, he also pointed out that since mid-2022, there has been significant pressure on the brand’s financial position.

“As a result, we’ve seen our balance sheet continue to be under pressure, limiting our ability to invest in growth and innovation,” remarked Fulop. “We began to notice a concerning trend towards the end of the second quarter, with customers becoming hesitant to engage in closing deals due to our weakening financial outlook, making it more difficult to reach our profitability targets. This feedback from the market was a clear signal that we needed to take action, it became increasingly apparent that remaining a stand-alone company with a constrained balance sheet was not a viable long-term strategy.”

This feedback from the market signaled the need for significant action, leading to the proposed merger with Nano Dimension. By combining their complementary product portfolios and technologies, the new entity will have more scale, a stronger financial position, and a boost to its competitive position.

According to Fulop, once the failed attempts to merge with Stratasys ended in 2023, Desktop Metal began to explore other strategic options to improve its financial standing and competitive position in the industry.

“We explored raising additional capital to strengthen our balance sheet, but the financing alternatives available to the company would have created significant dilution to shareholders or ceding control via structured to debt holders, which would have destroyed a lot of our remaining equity value. It didn’t help to have short selling activity that we believe drove down the value of our equity significantly,” said Fulop.

AMS 2024 CEO Panel (left): Troy Jensen, Ric Fulop, Sam O’Leary, Brad Kreger, and Yoav Zeif. Image courtesy of 3DPrint.com/Ashley Alleyne.

“In evaluating our options, we have to consider the broader context of AM as an industry. It’s worth noting that profitability has been elusive across all the public companies in the additive sector. While we have declined in value in line with most of our peers, the situation could have been worse, and in fact, it has been for some players in our space. For example, four of our western publicly traded companies in AM have failed or were delisted in the last two quarters, given deteriorating market conditions, leading to an even more pronounced loss of equity value for those businesses and we do not want to be in that bucket.”

With the sector undergoing recent financial struggles and companies like Shapeways and Fathom being delisted, it’s clear that AM companies are facing a tough environment. In fact, Desktop Metal also received a notice of non-compliance from the New York Stock Exchange (NYSE). In November 2023, the company was notified that it was not meeting continued listing standards because its stock price had averaged less than $1 over a consecutive 30 trading-day period. To address this issue and avoid delisting, Desktop Metal announced a reverse stock split, effective June 11, 2024, that would increase its stock price to meet the NYSE’s minimum bid price requirement.

The PureSinter Furnace’s horizontal shelving system is made of high-purity graphite. Image courtesy of Desktop Metal.

During the second quarter, Desktop Metal continued to execute its cost reduction plans while aligning its business structure with the current 3D printing market. The company launched and began selling the all-new PureSinter Furnace for high-purity, one-run debonding, and sintering of metal parts. The first unit was sold to AmPd Labs in Texas. Additionally, Desktop Metal announced that platinum is now customer-qualified on the DM Production System binder jet 3D printing platform by Legor, an Italy-based leader in metals science.

At the 2024 RAPID + TCT event, Desktop Metal showcased over 24 customer applications and breakthroughs in metal and ceramic 3D printing production. These included collaborations with Bega, a global leader in fine architectural outdoor and indoor lighting, and Eaton, an intelligent power management company.

Another highlight was installing the fourth Figur G-15 Digital Sheet Forming system at Wisconsin-based Evology Manufacturing, an ITAR-registered full-service contract manufacturer. Meanwhile, Desktop Health announced that its proprietary Flexcera Smile Ultra+ Dental Resin is now validated to 3D print strong and lifelike teeth restorations for dental implantology.

Flexcera® Smile Ultra+ dental resin. Image courtesy of Desktop Metal.

Financially, the company reported a gross margin of negative 83%, impacted by one-time non-cash charges. However, the adjusted gross margin was 29.2%. The company’s cash, cash equivalents, and short-term investments closed at $46.7 million, with a reduction in the rate of operating cash consumption compared to the same quarter last year.

Due to the pending acquisition by Nano Dimension, Desktop Metal says it will no longer provide financial guidance for the remainder of 2024. This decision allows the company to focus on addressing its financial challenges and stabilizing its operations during the merger process. By not issuing short-term financial expectations, Desktop Metal can concentrate on long-term improvements.

The announcement of the merger has been a key development for Desktop Metal. As Fulop highlighted, this combination will create a “true leader” in AM. The CEO describes the move as strategically ideal for Desktop Metal shareholders at “this critical juncture.”