Call Start: 16:30 January 1, 0000 5:16 PM ET Desktop Metal, Inc. (NYSE:DM) Q1 2023 Earnings Conference Call May 10, 2023 16:30 ET Company Participants Jay Gentzkow - Vice President of Investor Relations Ric Fulop - Founder & Chief Executive Officer Jason Cole - Chief Financial Officer Conference Call Participants Greg Palm - Craig Hallum Josh Pakrzywinski - Morgan Stanley Ashley Ellis - Credit Suisse Operator Greetings and welcome to the Desktop Metal's First Quarter 2020 Financial Results Call. A brief que ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2023, and 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $714,186 | $754,347 | | Total Current Assets | $316,163 | $336,416 | | Cash and cash equivalents | $101,252 | $76,291 | | Short-term investments | $48,554 | $108,243 | | Total Liabilities | $228,616 | $226,845 | | Total Current Liabilities | $83,462 | $83,387 | | Total Stockholders' Equity | $485,570 | $527,502 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $41,316 | $43,706 | | Total cost of sales | $42,680 | $45,034 | | Gross profit (loss) | $(1,364) | $(1,328) | | Total operating expenses | $50,953 | $68,151 | | Loss from operations | $(52,317) | $(69,479) | | Net loss | $(52,642) | $(69,944) | | Net loss per share—basic and diluted | $(0.16) | $(0.22) | | Weighted average shares outstanding, basic and diluted | 319,095,656 | 312,016,627 | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net loss | $(52,642) | $(69,944) | | Unrealized gain (loss) on available-for-sale marketable securities, net | $189 | $12 | | Foreign currency translation adjustment | $1,549 | $(11,047) | | Total comprehensive (loss) income, net of taxes of $0 | $(50,904) | $(80,979) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Changes in Stockholders' Equity (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Balance—January 1 | $527,502 | $1,248,350 | | Exercise of Common Stock options | $597 | $900 | | Repurchase of shares for employee tax withholdings | $(99) | $(158) | | Stock-based compensation expense | $8,474 | $9,912 | | Net loss | $(52,642) | $(69,944) | | Other comprehensive income (loss) | $1,738 | $(11,035) | | Balance—March 31 | $485,570 | $1,178,025 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(37,346) | $(56,274) | | Net cash provided by investing activities | $61,427 | $94,534 | | Net cash provided by financing activities | $248 | $699 | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $217 | $(349) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $24,546 | $38,610 | | Cash, cash equivalents, and restricted cash at end of period | $106,459 | $106,868 | Notes to Condensed Consolidated Financial Statements [1. Organization, Nature of Business, and Risk and Uncertainties](index=9&type=section&id=1.%20ORGANIZATION%2C%20NATURE%20OF%20BUSINESS%2C%20AND%20RISK%20AND%20UNCERTAINTIES) Details the company's focus on 3D printing solutions and confirms sufficient capital for the next twelve months - Desktop Metal, Inc. was founded in 2015 and focuses on accelerating manufacturing transformation with 3D printing solutions[16](index=16&type=chunk) - The company's long-term success depends on successfully marketing products, generating revenue, managing costs, meeting obligations, and obtaining additional capital[19](index=19&type=chunk) - Management believes **existing cash and short-term investments** as of March 31, 2023, will fund operations and capital expenditures for at least the next twelve months[19](index=19&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Financial statements are prepared under US GAAP, with no significant policy changes in Q1 2023 except for assets held for sale - Financial statements are prepared in conformity with US GAAP and SEC regulations, consolidating the Company and its wholly-owned subsidiaries[20](index=20&type=chunk)[21](index=21&type=chunk) - No changes to significant accounting policies occurred during the first three months of fiscal year 2023, except for the policy on assets held for sale[22](index=22&type=chunk) - Assets held for sale are classified when specific criteria are met and are recorded at the **lower of their carrying value or fair value less costs to sell**[23](index=23&type=chunk) [3. Revenue Recognition](index=11&type=section&id=3.%20REVENUE%20RECOGNITION) Deferred revenue increased to $18.6 million, with $14.6 million of performance obligations expected to be fulfilled within 12 months Deferred Revenue (in millions) | Date | Balance | | :--- | :--- | | March 31, 2023 | $18.6 | | December 31, 2022 | $17.4 | - During the three months ended March 31, 2023, the Company recognized **$3.4 million** of existing deferred revenue from 2022[24](index=24&type=chunk) - As of March 31, 2023, **$14.6 million** of remaining performance obligations are expected to be fulfilled over the next 12 months, and customer deposits totaled **$12.3 million**[26](index=26&type=chunk) [4. Cash Equivalents and Short-Term Investments](index=11&type=section&id=4.%20CASH%20EQUIVALENTS%20AND%20SHORT-TERM%20INVESTMENTS) Cash equivalents and short-term investments decreased to $91.8 million, with a $0.4 million unrealized loss on equity securities Cash Equivalents and Short-Term Investments (in thousands) | Category | March 31, 2023 Fair Value | December 31, 2022 Fair Value | | :--- | :--- | :--- | | Money market funds | $43,944 | $51,274 | | Commercial paper | $4,994 | $39,781 | | Corporate bonds | $18,140 | $28,814 | | U.S. Treasury securities | $9,900 | $19,818 | | Government bonds | $14,834 | $14,744 | | Asset-backed securities | — | $3,998 | | Total | $91,812 | $158,429 | - The Company recorded an **unrealized loss of $0.4 million** on equity securities due to changes in fair value during the three months ended March 31, 2023[28](index=28&type=chunk) [5. Fair Value Measurements](index=12&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) Total assets measured at fair value were $94.5 million, while Level 3 contingent consideration liability decreased to $1.8 million Fair Value Hierarchy of Financial Assets (in thousands) | Category | March 31, 2023 Total | December 31, 2022 Total | | :--- | :--- | :--- | | Level 1 Assets | $44,630 | $52,362 | | Level 2 Assets | $47,868 | $107,145 | | Level 3 Assets | $2,000 | $2,000 | | Total Assets | $94,498 | $161,517 | | Level 3 Liabilities (Contingent consideration) | $1,754 | $2,587 | | Total Liabilities | $1,754 | $2,587 | - During the three months ended March 31, 2023, the Company paid **$0.8 million** of contingent consideration[35](index=35&type=chunk) - **No transfers** between fair value measure levels occurred during the three months ended March 31, 2023 and 2022[36](index=36&type=chunk) [6. Accounts Receivable](index=14&type=section&id=6.%20ACCOUNTS%20RECEIVABLE) Total accounts receivable decreased to $35.6 million, while the allowance for doubtful accounts increased to $1.8 million Accounts Receivable (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade receivables | $37,422 | $40,121 | | Allowance for doubtful accounts | $(1,819) | $(1,640) | | Total accounts receivable | $35,603 | $38,481 | Allowance for Doubtful Accounts Activity (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Balance at beginning of period | $1,640 | $665 | | Provision for uncollectible accounts, net of recoveries | $179 | $1,393 | | Uncollectible accounts written off | — | $(418) | | Balance at end of period | $1,819 | $1,640 | [7. Inventory](index=15&type=section&id=7.%20INVENTORY) Total inventory increased to $98.2 million, driven by a rise in raw materials and work in process Inventory Components (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Raw materials | $46,763 | $41,971 | | Work in process | $13,531 | $11,936 | | Finished goods | $37,927 | $37,829 | | Total inventory | $98,221 | $91,736 | [8. Prepaid Expenses and Other Current Assets](index=15&type=section&id=8.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets increased to $21.1 million, mainly due to higher prepaid operating expenses Prepaid Expenses and Other Current Assets (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Prepaid operating expenses | $9,060 | $5,705 | | Prepaid dues and subscriptions | $2,886 | $2,674 | | Prepaid insurance | $2,773 | $798 | | Prepaid taxes | $1,818 | $395 | | Total prepaid expenses and other current assets | $21,067 | $16,325 | [9. Assets Held for Sale](index=15&type=section&id=9.%20ASSETS%20HELD%20FOR%20SALE) Assets held for sale increased to $6.9 million following a plan to sell a facility in North Huntington, Pennsylvania - The Company approved plans to sell facilities in Troy, Michigan, and North Huntington, Pennsylvania, classifying them as assets held for sale[41](index=41&type=chunk) Assets Held for Sale (in thousands) | Date | Carrying Value | | :--- | :--- | | March 31, 2023 | $6,871 | | December 31, 2022 | $830 | - Subsequent to March 31, 2023, the Troy, Michigan facility was sold for **$1.7 million**[43](index=43&type=chunk) [10. Property and Equipment](index=16&type=section&id=10.%20PROPERTY%20AND%20EQUIPMENT) Net property and equipment decreased to $45.3 million, with a depreciation expense of $3.0 million for Q1 2023 Property and Equipment, Net (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Equipment | $45,312 | $48,632 | | Land and buildings | $9,414 | $15,893 | | Total property and equipment, net | $45,262 | $56,271 | Depreciation Expense (in thousands) | Period | Amount | | :--- | :--- | | Three months ended March 31, 2023 | $3,000 | | Three months ended March 31, 2022 | $3,100 | [11. Goodwill & Intangible Assets](index=16&type=section&id=11.%20GOODWILL%20&%20INTANGIBLE%20ASSETS) Goodwill increased slightly to $113.6 million, while net intangible assets decreased to $210.1 million Goodwill Activity (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Balance, beginning of year | $112,955 | $639,301 | | Foreign currency translation adjustment | $616 | $(26,940) | | Goodwill impairment | — | $(498,800) | | Balance, end of period | $113,571 | $112,955 | - **No goodwill impairment** was recorded for the three months ended March 31, 2023 and 2022[45](index=45&type=chunk) Intangible Assets, Net (in thousands) | Category | March 31, 2023 Net | December 31, 2022 Net | | :--- | :--- | :--- | | Acquired technology | $152,494 | $159,448 | | Trade name | $9,675 | $10,085 | | Customer relationships | $47,929 | $50,252 | | Capitalized software | $18 | $45 | | Total intangible assets | $210,117 | $219,830 | Amortization Expense (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Acquired technology | $7,480 | $6,433 | | Trade name | $415 | $422 | | Customer relationships | $2,520 | $2,902 | | Capitalized software | $27 | $27 | | Total amortization expense | $10,442 | $9,784 | [12. Other Noncurrent Assets](index=18&type=section&id=12.%20OTHER%20NONCURRENT%20ASSETS) Other noncurrent assets increased to $28.5 million, primarily due to a rise in right-of-use assets Other Noncurrent Assets (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Right of use asset | $22,515 | $22,147 | | Other investments | $2,000 | $2,000 | | Long-term deposits | $491 | $573 | | Other | $3,455 | $3,043 | | Total other noncurrent assets | $28,461 | $27,763 | [13. Accrued Expenses and Other Current Liabilities](index=19&type=section&id=13.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses and other current liabilities increased to $28.0 million, driven by higher interest and compensation accruals Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Compensation and benefits related | $8,396 | $8,058 | | Warranty reserve | $4,385 | $4,301 | | Current portion of contingent consideration | $1,754 | $2,587 | | 2027 Notes Interest | $3,267 | $901 | | Total accrued expenses and other current liabilities | $28,026 | $26,723 | Warranty Reserve Activity (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Balance at beginning of period | $4,301 | $4,048 | | Additions to warranty reserve | $252 | $4,484 | | Claims fulfilled | $(172) | $(4,231) | | Balance at end of period | $4,385 | $4,301 | [14. Debt](index=19&type=section&id=14.%20DEBT) The company has $115.0 million in Convertible Senior Notes due 2027 with a net carrying value of $112.0 million - In May 2022, the Company issued **$115.0 million** principal amount of 6.0% Convertible Senior Notes due 2027[54](index=54&type=chunk) 2027 Convertible Notes Carrying Value (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Principal | $115,000 | $115,000 | | Net carrying value | $112,017 | $111,834 | Interest Expense for 2027 Notes (in thousands) | Metric | Three Months Ended March 31, 2023 | | :--- | :--- | | Coupon interest | $1,725 | | Amortization of debt discount | $144 | | Amortization of transaction costs | $39 | | Total interest expense | $1,908 | - As of March 31, 2023, **$0.5 million** of bank loans (acquired with A.I.D.R.O.) remain outstanding, with $0.3 million classified as current[61](index=61&type=chunk) [15. Other Noncurrent Liabilities](index=21&type=section&id=15.%20OTHER%20NONCURRENT%20LIABILITIES) Other noncurrent liabilities increased to $3.2 million from $1.4 million, primarily due to a rise in 'Other' liabilities Other Noncurrent Liabilities (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Taxes payable | $1,034 | $1,034 | | Other | $2,133 | $325 | | Total other noncurrent liabilities | $3,167 | $1,359 | [16. Leases](index=21&type=section&id=16.%20LEASES) The company reported $22.5 million in right-of-use assets and $23.8 million in lease liabilities as of March 31, 2023 Lease-Related Balances (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Right of use asset | $22,515 | $22,147 | | Lease liability | $23,800 | $23,600 | Total Lease Cost (in thousands) | Period | Amount | | :--- | :--- | | Three months ended March 31, 2023 | $1,613 | | Three months ended March 31, 2022 | $1,610 | Future Minimum Lease Payments (in thousands) | Year | Operating Leases | Finance Leases | | :--- | :--- | :--- | | 2023 | $5,285 | $62 | | 2024 | $5,505 | $78 | | 2025 | $4,721 | $77 | | 2026 | $3,796 | $77 | | 2027 | $3,505 | $77 | | 2028 and after | $2,966 | $317 | | Total lease payments | $25,778 | $688 | [17. Commitments and Contingencies](index=23&type=section&id=17.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in various legal proceedings and has purchase commitments totaling $69.2 million - The Company is defending against several class action lawsuits alleging violations of federal securities laws and breach of fiduciary duties related to the ExOne Merger and disclosures about EnvisionTEC[68](index=68&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Outstanding purchase orders with contract manufacturers amount to **$47.2 million** as of March 31, 2023[75](index=75&type=chunk) - The Company has an additional purchase commitment of **$22.0 million** through 2027 for equipment to be leased to customers for digital dentistry solutions[75](index=75&type=chunk) - Total outstanding financial guarantees and letters of credit issued under a credit facility were **$4.0 million** at March 31, 2023, requiring $4.0 million in cash collateral[78](index=78&type=chunk) [18. Income Taxes](index=26&type=section&id=18.%20INCOME%20TAXES) The company recorded an income tax benefit of $0.6 million in Q1 2023, maintaining a valuation allowance for most deferred tax assets Income Tax Benefit (in thousands) | Period | Amount | | :--- | :--- | | Three months ended March 31, 2023 | $557 | | Three months ended March 31, 2022 | $1,256 | - The Company maintains a **valuation allowance** for most deferred tax assets due to historical net losses, except for Japan and Belgium[80](index=80&type=chunk) - As of March 31, 2023, the Company has accrued **$1.0 million** for uncertain tax positions related to the EnvisionTEC acquisition[81](index=81&type=chunk) [19. Stockholders' Equity](index=28&type=section&id=19.%20STOCKHOLDERS'%20EQUITY) The company's authorized capital includes 500 million shares of Class A Common Stock and 50 million shares of Preferred Stock - Authorized shares include **500,000,000 shares** of Class A Common Stock and **50,000,000 shares** of Preferred Stock[82](index=82&type=chunk) - **No Preferred Stock shares** were issued and outstanding at March 31, 2023, and December 31, 2022[5](index=5&type=chunk) [20. Stock Based Compensation](index=28&type=section&id=20.%20STOCK%20BASED%20COMPENSATION) Total stock-based compensation expense was $9.3 million for Q1 2023, with $67.6 million in unrecognized costs for outstanding RSUs Total Stock-Based Compensation Expense (in thousands) | Period | Amount | | :--- | :--- | | Three months ended March 31, 2023 | $9,313 | | Three months ended March 31, 2022 | $9,912 | Stock Options Activity (shares in thousands) | Metric | Outstanding at Jan 1, 2023 | Outstanding at Mar 31, 2023 | | :--- | :--- | :--- | | Number of Shares | 8,423 | 7,771 | | Weighted-Average Exercise Price per Share | $1.83 | $1.86 | | Weighted-Average Remaining Contractual Term (in years) | 6.02 | 5.70 | | Aggregate Intrinsic Value (in thousands) | $922,092 | $4,720 | Restricted Stock Units (RSUs) Activity (shares in thousands) | Metric | Balance of unvested shares as of Jan 1, 2023 | Balance of unvested shares as of Mar 31, 2023 | | :--- | :--- | :--- | | Shares Subject to Vesting | 22,145 | 22,876 | | Weighted-Average Grant Date Fair Value | $4.15 | $3.71 | | Unrecognized compensation costs | N/A | $67,600 | [21. Related Party Transactions](index=32&type=section&id=21.%20RELATED%20PARTY%20TRANSACTIONS) The company has lease agreements with related parties and recognized $0.4 million in revenue from an affiliated entity in Q1 2023 - As of March 31, 2023, the Company recorded **$4.7 million** of right-of-use assets and lease liabilities related to lease agreements with related parties[105](index=105&type=chunk) - During the three months ended March 31, 2023, the Company recognized **$0.4 million** of revenue from sales to Lightforce Orthodontics, an affiliated company[106](index=106&type=chunk) [22. Segment Information](index=32&type=section&id=22.%20SEGMENT%20INFORMATION) The company operates as a single segment, with revenue decreasing 12% in the Americas but increasing in EMEA and APAC Revenue by Geographic Region (in thousands) | Region | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Americas | $27,041 | $30,735 | (12)% | | EMEA | $10,259 | $9,793 | 5% | | APAC | $4,016 | $3,178 | 26% | | Total Revenue | $41,316 | $43,706 | (5)% | Revenue by Type (in thousands) | Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Products | $36,697 | $39,476 | (7)% | | Services | $4,619 | $4,230 | 9% | | Total Revenue | $41,316 | $43,706 | (5)% | Long-Lived Assets by Geographic Region (in thousands) | Region | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Americas | $46,339 | $56,145 | | EMEA | $16,270 | $16,399 | | APAC | $6,441 | $5,874 | | Total long-lived assets | $69,050 | $78,418 | [23. Net Loss Per Share](index=34&type=section&id=23.%20NET%20LOSS%20PER%20SHARE) Basic and diluted net loss per share improved to $(0.16) for Q1 2023 from $(0.22) in Q1 2022 Net Loss Per Share (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net loss | $(52,642) | $(69,944) | | Weighted-average shares | 319,096 | 312,017 | | Net loss per share—Basic and Diluted | $(0.16) | $(0.22) | - Potential dilutive securities (stock options, unvested restricted stock units, unvested restricted stock awards, and convertible senior notes) were **excluded from diluted net loss per share calculation** because their effect would be anti-dilutive[111](index=111&type=chunk) [24. Restructuring Charges](index=34&type=section&id=24.%20RESTRUCTURING%20CHARGES) The company recorded $3.6 million in restructuring charges in Q1 2023 as part of an expanded cost optimization initiative - In January 2023, the Company committed to expanding its strategic integration and cost optimization initiative, anticipating **$19.6 million to $26.0 million** in additional restructuring costs[113](index=113&type=chunk) Restructuring Charges Activity (in thousands) | Metric | Three Months Ended March 31, 2023 | | :--- | :--- | | Accrued expenses, beginning of period | $1,096 | | Restructuring charges | $3,618 | | Cash payments | $(1,164) | | Inventory write-off | $(300) | | Accrued expenses, end of period | $3,250 | Restructuring Charges by Expense Category (in thousands) | Category | Three Months Ended March 31, 2023 | | :--- | :--- | | Cost of sales | $717 | | Research and development | $2,633 | | Sales and marketing | $126 | | General and administrative | $142 | | Total restructuring charges | $3,618 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides an overview of the business, recent financial performance, strategic initiatives, and macroeconomic impacts [Business Overview](index=36&type=section&id=Business%20Overview) - Desktop Metal pioneers Additive Manufacturing 2.0, focusing on volume production of end-use parts with a comprehensive portfolio of hardware, software, materials, and services[120](index=120&type=chunk) - The company's growth strategy is driven by significant investment in R&D, resulting in **over 950 patents or pending applications**, to make additive manufacturing easy, economic, and scalable[121](index=121&type=chunk) - Solutions offer breakthrough print speeds, competitive part costs, accessible workflows, turnkey solutions, and support for an extensive library of qualified materials, generating recurring revenue[122](index=122&type=chunk) [Operating Results](index=38&type=section&id=Operating%20Results) Key Financial Highlights (Three Months Ended March 31, 2023, in millions) | Metric | Amount | | :--- | :--- | | Revenues | $41.3 | | Net losses | $52.6 | | Cash used in operating activities | $37.3 | | Cash, cash equivalents, and short-term investments (period-end) | $149.9 | | Current liabilities (period-end) | $83.5 | [Recent Developments](index=38&type=section&id=Recent%20Developments) - The Strategic Integration and Cost Optimization Initiative, expanded in January 2023, includes workforce reductions (additional 15%), facilities consolidation, and aims for **$100 million in annualized cost savings** in 2023[128](index=128&type=chunk)[129](index=129&type=chunk) - Total pre-tax restructuring charges for committed activities are expected to be **$19.6 million to $26.0 million**[129](index=129&type=chunk) - The COVID-19 pandemic has disrupted global supply chains and may accelerate the adoption of additive manufacturing for greater flexibility and reduced reliance on overseas manufacturing[131](index=131&type=chunk)[133](index=133&type=chunk) [Key Factors Affecting Operating Results](index=40&type=section&id=Key%20Factors%20Affecting%20Operating%20Results) - Performance depends on the adoption rate of additive manufacturing solutions, with fluctuations expected as businesses shift from conventional processes[135](index=135&type=chunk) - Financial performance is influenced by product mix, pricing strategies, and the ability to introduce cost-effective solutions amidst price competition[136](index=136&type=chunk) - Continued investment in R&D and innovation is crucial for long-term revenue growth, though it may impact near-term profitability[137](index=137&type=chunk) - Macroeconomic conditions, including inflation and rising interest rates, are causing customers to **delay purchase decisions** and tighten budgets, impacting revenue growth[140](index=140&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Revenue Comparison (Three Months Ended March 31, in thousands) | Metric | 2023 Revenue | 2022 Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Products Revenue | $36,697 | $39,476 | $(2,779) | (7)% | | Services Revenue | $4,619 | $4,230 | $389 | 9% | | Total Revenue | $41,316 | $43,706 | $(2,390) | (5)% | - Total revenue **decreased by 5%** due to reduced product unit shipments, primarily driven by macroeconomic conditions, partially offset by a **9% increase** in services revenue[142](index=142&type=chunk) Gross Profit (Loss) Comparison (Three Months Ended March 31, in thousands) | Metric | 2023 Gross Profit | 2022 Gross Profit | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Products | $(2,194) | $(2,426) | $232 | (10)% | | Services | $830 | $1,098 | $(268) | (24)% | | Total | $(1,364) | $(1,328) | $(36) | 3% | - Gross loss increased slightly by **$0.1 million**, driven by a less favorable product mix and higher transportation/freight costs, despite savings from headcount reductions[149](index=149&type=chunk)[151](index=151&type=chunk) Operating Expenses Comparison (Three Months Ended March 31, in thousands) | Expense Category | 2023 Amount | 2022 Amount | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $23,144 | $24,605 | $(1,461) | (6)% | | Sales and marketing | $9,607 | $19,689 | $(10,082) | (51)% | | General and administrative | $18,202 | $23,857 | $(5,655) | (24)% | | Total operating expenses | $50,953 | $68,151 | $(17,198) | (25)% | - Operating expenses **decreased significantly by 25%**, primarily due to workforce reductions and reduced marketing spend as part of the Initiative, and lower accounting/legal fees[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk) [Non-GAAP Financial Information](index=46&type=section&id=Non-GAAP%20Financial%20Information) - Non-GAAP financial measures (gross margin, operating loss, net loss, EBITDA, Adjusted EBITDA) are used to evaluate operational performance by excluding non-cash and non-recurring items like stock-based compensation, amortization of acquired intangibles, restructuring expenses, and acquisition-related charges[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) Non-GAAP Reconciliation (Three Months Ended March 31, in thousands) | Metric | 2023 GAAP | 2023 Non-GAAP | 2022 GAAP | 2022 Non-GAAP | | :--- | :--- | :--- | :--- | :--- | | Gross margin | $(1,364) | $7,439 | $(1,328) | $7,468 | | Operating loss | $(52,317) | $(27,538) | $(69,479) | $(44,616) | | Net loss | $(52,642) | $(27,684) | $(69,944) | $(43,381) | | Operating expenses | $50,953 | $34,977 | $68,151 | $52,084 | | EBITDA | $(38,955) | N/A | $(58,349) | N/A | | Adjusted EBITDA | N/A | $(24,439) | N/A | $(41,570) | [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company has an **accumulated deficit of $1,361.6 million** as of March 31, 2023, and expects to continue incurring net losses and negative cash flows in the near term[178](index=178&type=chunk) Liquidity Position (as of March 31, 2023, in millions) | Metric | Amount | | :--- | :--- | | Cash, cash equivalents, and short-term investments | $149.9 | | Current liabilities | $83.5 | - Existing capital resources are believed to be **sufficient for the next 12 months**, but additional capital may be needed through equity or debt financings[184](index=184&type=chunk) - The Strategic Integration and Cost Optimization Initiative is expected to incur **$19.6 million to $26.0 million** in costs, aiming to preserve capital and reduce operating expenses[185](index=185&type=chunk)[186](index=186&type=chunk) [Cash Flows](index=52&type=section&id=Cash%20Flows) Summary of Cash Flows (Three Months Ended March 31, in thousands) | Activity | 2023 Amount | 2022 Amount | | :--- | :--- | :--- | | Net cash used in operating activities | $(37,346) | $(56,274) | | Net cash provided by investing activities | $61,427 | $94,534 | | Net cash provided by financing activities | $248 | $699 | | Net change in cash, cash equivalents, and restricted cash | $24,546 | $38,610 | - **Net cash used in operating activities decreased to $37.3 million** in Q1 2023 from $56.3 million in Q1 2022, primarily due to lower net losses and improved working capital management[188](index=188&type=chunk)[189](index=189&type=chunk) - **Net cash provided by investing activities was $61.4 million** in Q1 2023, mainly from marketable securities sales and maturities, partially offset by purchases[190](index=190&type=chunk) [Critical Accounting Policies and Significant Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) - There were **no material changes** to critical accounting policies and estimates during the first three months of 2023[193](index=193&type=chunk) [Off-Balance Sheet Arrangements](index=53&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company's German subsidiary, ExOne GmbH, has **$4.0 million** in outstanding short-term financial guarantees and letters of credit through a credit facility[194](index=194&type=chunk) - The Company does not utilize any other off-balance sheet arrangements or special purpose entities for liquidity or financing[195](index=195&type=chunk) [Recent Accounting Pronouncements](index=53&type=section&id=Recent%20Accounting%20Pronouncements) - Information regarding recent accounting pronouncements is included in Note 2. Summary of Significant Accounting Policies[196](index=196&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate and foreign currency fluctuations, which are currently not material - The Company is exposed to market risks from fluctuations in **interest rates and foreign currency translation**[197](index=197&type=chunk) - As of March 31, 2023, the fair value of cash, cash equivalents, and short-term investments was **$149.9 million**, with a 10% change in interest rates having an immaterial impact[198](index=198&type=chunk) - Foreign currency risk is **not currently material**, and the Company does not use foreign currency forward contracts to manage exchange rate risk[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed not effective due to material weaknesses, though financial statements are fairly presented - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2023, due to material weaknesses in internal control over financial reporting[201](index=201&type=chunk) - Despite material weaknesses, financial statements in this 10-Q are concluded to **present fairly** the company's financial position, results of operations, and cash flows[202](index=202&type=chunk) - **Remediation efforts** for identified material weaknesses are ongoing, with no material changes to internal control over financial reporting during the three months ended March 31, 2023[203](index=203&type=chunk) [PART II. OTHER INFORMATION](index=54&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending various legal claims, including class action lawsuits, which are not expected to have a material adverse impact - The Company is subject to various legal claims and lawsuits, including class action complaints related to the ExOne Merger and alleged misleading statements about EnvisionTEC[206](index=206&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Management believes the outcome of current legal proceedings **will not have a material adverse impact** on the condensed consolidated financial statements and intends to defend vigorously[206](index=206&type=chunk)[215](index=215&type=chunk) - Several putative class action complaints against ExOne and its former Board of Directors have been **dismissed**[207](index=207&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) Outlines numerous risks affecting the business, including product development, financial stability, and macroeconomic uncertainties [Summary of Risk Factors](index=56&type=section&id=Summary%20of%20Risk%20Factors) - Key risks include significant delays in product design and launch, potential failure to commercialize products, and the possibility that **restructuring activities may not achieve intended results**[216](index=216&type=chunk) - Difficulties in integrating acquired companies and realizing expected benefits, along with a **history of losses** and potential future unprofitability, pose significant financial risks[216](index=216&type=chunk) - Future sales or the perception of future sales of Class A common stock could cause a **decline in market price**[216](index=216&type=chunk) [Risks Related to Our Business and Industry](index=58&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - **Significant delays** in the design, production, and launch of additive manufacturing solutions, or failure to commercialize products on planned timelines, could damage the brand and financial results[219](index=219&type=chunk)[222](index=222&type=chunk) - The COVID-19 pandemic has disrupted and may continue to disrupt business activities, supply chains, and customer payments, potentially **increasing costs and reducing revenue**[224](index=224&type=chunk)[225](index=225&type=chunk) - Restructuring activities and cost savings measures **may not achieve anticipated results**, potentially leading to litigation risks, negative employee morale, and adverse effects on revenue and operating results[226](index=226&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - Changes in product mix, failure to meet customer price expectations, or **slower-than-expected market adoption** of additive manufacturing could negatively impact demand, gross margins, and financial performance[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - The company's success depends on **attracting and retaining key management and employees**, and failure to do so could delay strategy implementation and adversely affect operations[241](index=241&type=chunk)[242](index=242&type=chunk)[245](index=245&type=chunk) - Global operations expose the company to risks such as **currency exchange rate volatility**, difficulties in managing foreign operations, and compliance with complex international laws and trade restrictions[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - Reliance on information technology systems and the implementation of a new ERP system pose risks of **disruption, data breaches, and delays** in financial reporting[261](index=261&type=chunk)[263](index=263&type=chunk)[266](index=266&type=chunk)[269](index=269&type=chunk) [Risks Related to Acquisitions](index=76&type=section&id=Risks%20Related%20to%20Acquisitions) - **Difficulties or delays in integrating acquired companies**, such as EnvisionTEC and ExOne, could lead to loss of key employees, operational disruptions, and failure to realize anticipated business opportunities and synergies[283](index=283&type=chunk)[284](index=284&type=chunk) - Future acquisitions may divert management's attention, incur significant costs, **dilute existing shareholders**, and introduce unknown liabilities or integration challenges[287](index=287&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=79&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) - The company has a **history of net losses and an accumulated deficit**, expecting continued operating losses and negative cash flow in the near term due to significant investments[291](index=291&type=chunk)[178](index=178&type=chunk) - **Limited operating history and rapid growth** make future prospects difficult to evaluate, increasing investment risk and uncertainty in forecasting operating results[293](index=293&type=chunk) - **Failure to meet publicly announced guidance** or market expectations could cause the stock price to decline, as predicting future revenues and budgeting expenses is inherently uncertain[294](index=294&type=chunk)[295](index=295&type=chunk) - Operating results and financial condition are subject to **significant period-to-period fluctuations** due to market acceptance, competition, product mix, sales cycles, and macroeconomic factors[296](index=296&type=chunk)[297](index=297&type=chunk) - **Additional capital may be required** to support business growth, which might not be available on acceptable terms, potentially leading to dilution or restrictive debt covenants[301](index=301&type=chunk) [Risks Related to Third Parties](index=83&type=section&id=Risks%20Related%20to%20Third%20Parties) - The company could face **product liability, warranty, and other claims** for allegedly defective products, especially given their use in potentially hazardous applications[303](index=303&type=chunk)[304](index=304&type=chunk) - Reliance on a global network of resellers for sales, installation, and support services means **poor performance or termination of contracts** could adversely affect sales and reputation[306](index=306&type=chunk) - Dependence on a **limited number of third-party contract manufacturers and suppliers** for production and materials creates risks of delays, disruptions, quality control problems, and increased costs[309](index=309&type=chunk)[311](index=311&type=chunk)[315](index=315&type=chunk) - Facilities and those of third-party partners are **vulnerable to disruption** from natural disasters, climate-related events, strikes, and other uncontrollable events, potentially delaying production and sales[316](index=316&type=chunk) [Risks Related to Our Class A Common Stock](index=89&type=section&id=Risks%20Related%20to%20Our%20Class%20A%20Common%20Stock) - Issuance of additional shares or convertible securities could **dilute existing ownership** and adversely affect the stock price[319](index=319&type=chunk)[320](index=320&type=chunk) - **Future sales**, or the perception of future sales, of Class A common stock by the company or existing stockholders could cause the market price to decline[321](index=321&type=chunk) - Directors, executive officers, and affiliated stockholders own a significant percentage of Class A common stock, allowing them to exert **substantial control** over shareholder approval matters[322](index=322&type=chunk)[324](index=324&type=chunk) - **Anti-takeover provisions** in governing documents and Delaware law could make an acquisition more difficult, limit attempts to replace management, and affect the stock price[325](index=325&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) [Risks Related to Our Indebtedness](index=93&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) - Indebtedness, including **$115.0 million in 6.0% Convertible Senior Notes due 2027**, could limit cash flow for operations, increase vulnerability to economic conditions, and impair the ability to satisfy obligations[333](index=333&type=chunk)[336](index=336&type=chunk) - The company may be **unable to raise funds to repurchase the 2027 Notes** following a fundamental change or pay cash upon conversion, potentially leading to default[335](index=335&type=chunk)[338](index=338&type=chunk) - Provisions in the indenture governing the 2027 Notes could **delay or prevent an otherwise beneficial takeover** by increasing acquisition costs or discouraging third parties[339](index=339&type=chunk) [Risks Related to Compliance Matters](index=95&type=section&id=Risks%20Related%20to%20Compliance%20Matters) - Failure to comply with anti-corruption laws (e.g., U.S. FCPA, U.K. Bribery Act) and various trade restrictions (e.g., sanctions, export controls) could result in **substantial fines, sanctions, and reputational damage**[340](index=340&type=chunk)[341](index=341&type=chunk) - The company is subject to environmental, health, and safety laws and regulations, which could lead to **compliance costs, potential liability for non-compliance, and substantial monetary damages**[342](index=342&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk) - Increasing attention to **ESG initiatives** could raise costs, harm reputation, or adversely impact business due to stakeholder expectations and potential negative investor sentiment[346](index=346&type=chunk) - Compliance with privacy, data use, and data security regulations (e.g., GDPR, CCPA) is expensive and time-consuming, with potential for **increased costs, regulatory enforcement, and reputational harm** if not met[347](index=347&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk) - Medical device and solution products are subject to extensive regulations, and failure to obtain or maintain approvals/clearances could **impact financial projections and lead to penalties**[351](index=351&type=chunk) [Risks Related to Intellectual Property](index=99&type=section&id=Risks%20Related%20to%20Intellectual%20Property) - Third-party lawsuits alleging **infringement of patents, trade secrets, or other intellectual property rights** could result in significant adverse effects on financial condition, substantial costs, and disruption to business operations[352](index=352&type=chunk)[353](index=353&type=chunk) - **Inability to adequately protect or enforce intellectual property rights** could allow competitors to use proprietary information, particularly for consumables, reducing revenue and profitability[354](index=354&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) - The company's additive manufacturing software contains third-party open-source components, and **non-compliance with licenses** could restrict product sales or require costly re-engineering[362](index=362&type=chunk)[364](index=364&type=chunk) [General Risk Factors](index=103&type=section&id=General%20Risk%20Factors) - The Class A common stock price may be **volatile and decline** regardless of operating performance due to market factors, industry conditions, and company-specific events[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Failure of securities analysts to publish research or **issuing unfavorable commentary** could negatively impact the stock price and trading volume[369](index=369&type=chunk) - Obligations as a public company involve **significant expenses, resources, and management attention**, potentially diverting from business operations and impacting financial condition[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) - **Material weaknesses in internal control over financial reporting**, identified as of December 31, 2022, could impair the ability to produce timely and accurate financial statements, leading to adverse regulatory consequences and loss of investor confidence[375](index=375&type=chunk)[376](index=376&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Goodwill has been subject to impairment (**$498.8 million in 2022**) and may be impaired in the future, which could materially adversely affect financial condition and results of operations[383](index=383&type=chunk) - The company **does not intend to pay dividends** on its Class A common stock for the foreseeable future, retaining funds for business development and growth[385](index=385&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=109&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 61,718 shares in Q1 2023 for employee tax withholding obligations - All unregistered sales of equity securities during the three months ended March 31, 2023, were previously included in a Current Report on Form 8-K[387](index=387&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended March 31, 2023) | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | February 1, 2023 through February 28, 2023 | 21,480 | $1.78 | | March 1, 2023 through March 31, 2023 | 40,238 | $1.50 | | Total | 61,718 | N/A | - All repurchased shares were withheld from employees to satisfy **minimum tax withholding obligations** related to Class A common stock issuance[388](index=388&type=chunk) [Item 3. Defaults Upon Senior Securities](index=109&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - **No defaults** upon senior securities occurred during the period[389](index=389&type=chunk) [Item 4. Mine Safety Disclosures](index=109&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is **not applicable**[390](index=390&type=chunk) [Item 5. Other Information](index=109&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - **No other information** is reported under this item[391](index=391&type=chunk) [Item 6. Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q [Exhibit Index](index=110&type=section&id=Exhibit%20Index) - The Exhibit Index details certifications (CEO, CFO), Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation), and the Cover Page Interactive Data File[395](index=395&type=chunk) [Signatures](index=111&type=section&id=Signatures) The report is duly signed by the CEO and CFO as of May 10, 2023 - The report is signed by Ric Fulop, Chief Executive Officer, and Jason Cole, Chief Financial Officer, on **May 10, 2023**[400](index=400&type=chunk)

Fourth Quarter & Full Year 2022 l | --- | --- | --- | |-------|------------------------------------------------------------------------------|------------------------------------------| | | Desktop Metal (NYSE: DM) \| Q4 & FY 2022 financial results \nConference Call | Contacts | | | Speakers | Website: https://ir.desktopmetal.com = | | = | Ric Fulop, Founder & CEO | Email: investors@desktopmetal.com = | | = | Jason Cole, CFO | | | | | Tel: (857) 504-1084 = | | | | Investor Communications: = | | = | Jay Gent ...

Desktop Metal, Inc. (NYSE:DM) Q4 2022 Earnings Conference Call March 1, 2023 4:30 PM ET Company Participants Jay Gentzkow - Vice President, Investor Relations Ric Fulop - Founder and Chief Executive Officer Jason Cole - Chief Financial Officer Conference Call Participants Troy Jensen - Lake Street Capital Markets Greg Palm - Craig Hallum Noelle Dilts - Stifel Operator Greetings and welcome to the Desktop Metal Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions] As a ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) Desktop Metal pioneers Additive Manufacturing 2.0, providing comprehensive solutions for volume production of end-use parts across diverse materials and industries - Desktop Metal is pioneering **Additive Manufacturing 2.0**, focusing on the **volume production** of end-use parts across a wide range of materials and industries[16](index=16&type=chunk) - The company's growth strategy emphasizes **significant investment in R&D**, expansion of its **global distribution network**, and the development of **high-value production applications**, referred to as 'killer apps'[20](index=20&type=chunk)[38](index=38&type=chunk)[44](index=44&type=chunk) - Key competitive advantages are built on a portfolio of **over 950 patents** or pending applications, proprietary technologies like **Single Pass Jetting (SPJ)** and **Digital Light Processing (DLP)** that enable high-speed printing, and offering **integrated, turnkey solutions**[20](index=20&type=chunk)[45](index=45&type=chunk)[49](index=49&type=chunk) - The company utilizes a **hybrid sales model**, combining a direct sales force with a global distribution network of **over 140 resellers** in **more than 40 countries**[22](index=22&type=chunk)[92](index=92&type=chunk) - As of December 31, 2022, the company had **over 1,200 employees**, with a **majority engaged in research and development** and related functions[99](index=99&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including product commercialization delays, market adoption challenges, substantial net losses, and internal control weaknesses - The company has a history of significant net losses, reporting a **net loss of $740.3 million** for the year ended December 31, 2022, and may not achieve or maintain profitability in the future[196](index=196&type=chunk) - There are **significant risks of delays** in the design, production, and launch of new additive manufacturing solutions, which could prevent successful commercialization on planned timelines[121](index=121&type=chunk)[124](index=124&type=chunk) - The company faces **difficulties in integrating acquired businesses** like EnvisionTEC and ExOne, which could disrupt operations and prevent the realization of anticipated benefits[185](index=185&type=chunk) - **Material weaknesses in internal controls** over financial reporting were identified as of December 31, 2022, which could impair the ability to produce timely and accurate financial statements[273](index=273&type=chunk) - The business is **dependent on a limited number of third-party contract manufacturers and suppliers**, and any disruption could significantly impact operations and product shipments[216](index=216&type=chunk)[221](index=221&type=chunk) [Unresolved Staff Comments](index=86&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are **no unresolved staff comments**[284](index=284&type=chunk) [Properties](index=86&type=section&id=Item%202.%20Properties) Desktop Metal's global footprint includes approximately 690,000 square feet of space, with plans to consolidate facilities for operational savings - The company's corporate headquarters are in Burlington, Massachusetts, with a total global footprint of approximately **690,000 square feet** of owned or leased space as of year-end 2022[285](index=285&type=chunk)[286](index=286&type=chunk) - As part of its ongoing strategic initiative, the company intends to **close four facilities** and **consolidate them into four core locations** in the United States to achieve **operational savings**[287](index=287&type=chunk) [Legal Proceedings](index=86&type=section&id=Item%203.%20Legal%20Proceedings) The company faces multiple class action and derivative lawsuits primarily related to disclosures and practices at its subsidiary EnvisionTEC - The company is facing **multiple lawsuits**, including a **class action** (Campanella v. The ExOne Company) and several **securities class actions**, primarily related to disclosures and practices at its subsidiary, **EnvisionTEC**, in connection with the **ExOne Merger**[292](index=292&type=chunk)[293](index=293&type=chunk) - **Shareholder derivative actions** have also been filed, alleging that certain officers and directors caused harm to the company by making **false or misleading statements** regarding EnvisionTEC[294](index=294&type=chunk) - Desktop Metal states its belief that all current legal complaints are **without merit** and plans to **defend its position vigorously**[296](index=296&type=chunk) [Mine Safety Disclosures](index=88&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - **Not applicable**[297](index=297&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=89&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Desktop Metal's Class A common stock trades on the NYSE under 'DM', with the company retaining earnings for growth and not paying cash dividends - The company's Class A common stock is listed on the **NYSE** under the symbol **'DM'**[299](index=299&type=chunk) - The company has a policy of **not paying dividends** and intends to **retain all future earnings** to fund business operations and growth[301](index=301&type=chunk) Issuer Purchases of Equity Securities (Q4 2022) | Period | Total shares purchased | Average price paid per share | | :--- | :--- | :--- | | October 1-31, 2022 | — | $ — | | November 1-30, 2022 | 5,383 | $ 2.19 | | December 1-31, 2022 | 1,276 | $ 1.98 | | **Total** | **6,659** | | [Selected Financial Data](index=90&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable as per the report - **Not applicable**[307](index=307&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=90&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2022, revenue grew to **$209.0 million**, but a **$740.3 million net loss** was driven by a **$498.8 million goodwill impairment**, with **$115 million convertible debt** issued and **$100 million cost savings** planned Key Financial Results (FY 2022) | Metric | Amount (in millions) | | :--- | :--- | | Revenue | $209.0 | | Net Loss | $(740.3) | | Cash Used in Operating Activities | $(181.5) | | Cash, Cash Equivalents, and Short-term Investments (Year-End) | $184.5 | - In May 2022, the company issued **$115.0 million** in 6.0% Convertible Senior Notes due 2027[315](index=315&type=chunk)[413](index=413&type=chunk) - A strategic integration and cost optimization initiative was implemented, which is expected to generate annualized cost savings of **$100 million** in 2023[316](index=316&type=chunk)[317](index=317&type=chunk) - The company recorded a goodwill impairment charge of **$498.8 million** during the year ended December 31, 2022, which was a primary driver of the substantial net loss[318](index=318&type=chunk)[360](index=360&type=chunk) - The company believes its existing capital resources are **sufficient to support its operating plan for at least the next 12 months**, but may need to raise additional capital in the future[417](index=417&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=121&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations and foreign currency translation, but does not currently use derivative instruments for hedging - The primary market risks are **interest rate fluctuations** impacting the investment portfolio and **foreign currency translation risk** from European and Asian operations[452](index=452&type=chunk) - The company **does not currently use derivative financial instruments** for trading, speculative, or hedging purposes[452](index=452&type=chunk)[454](index=454&type=chunk) [Financial Statements and Supplementary Data](index=121&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements, with the auditor issuing an unqualified opinion on financials but an adverse opinion on internal controls - The independent auditor, Deloitte & Touche LLP, issued an **adverse opinion** on the company's **internal control over financial reporting** as of December 31, 2022, due to identified **material weaknesses**[498](index=498&type=chunk)[507](index=507&type=chunk) Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $336,416 | $402,009 | | **Total Assets** | $754,347 | $1,388,596 | | **Total Current Liabilities** | $83,387 | $104,065 | | **Total Liabilities** | $226,845 | $140,246 | | **Total Stockholders' Equity** | $527,502 | $1,248,350 | Consolidated Statement of Operations Data (in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | **Total Revenues** | $209,023 | $112,408 | | **Gross Profit (Loss)** | $15,071 | $18,293 | | **Loss from Operations** | $(731,763) | $(201,455) | | **Net Loss** | $(740,343) | $(240,334) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=121&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - **None**[456](index=456&type=chunk) [Controls and Procedures](index=121&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of December 31, 2022, due to material weaknesses across all five COSO components - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2022, due to **material weaknesses** in internal control over financial reporting[457](index=457&type=chunk) - Material weaknesses were identified in **all five components of the COSO framework**: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk) - **Remediation efforts are underway**, including hiring additional accounting personnel, engaging consultants, integrating systems, and implementing a new ERP system. However, these measures were **not fully remediated by year-end**[467](index=467&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk) [Other Information](index=125&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - **None**[473](index=473&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=125&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is not applicable to the company - **Not applicable**[474](index=474&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=125&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2023 Proxy Statement - Information is **incorporated by reference** from the forthcoming 2023 Proxy Statement[476](index=476&type=chunk) [Executive Compensation](index=125&type=section&id=Item%2011.%20Executive%20Compensation) Information detailing executive compensation is incorporated by reference from the forthcoming 2023 Proxy Statement - Information is **incorporated by reference** from the forthcoming 2023 Proxy Statement[478](index=478&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=125&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership by beneficial owners and management is incorporated by reference from the forthcoming 2023 Proxy Statement - Information is **incorporated by reference** from the forthcoming 2023 Proxy Statement[479](index=479&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=127&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the forthcoming 2023 Proxy Statement - Information is **incorporated by reference** from the forthcoming 2023 Proxy Statement[480](index=480&type=chunk) [Principal Accountant's Fees and Services](index=127&type=section&id=Item%2014.%20Principal%20Accountant%27s%20Fees%20and%20Services) Information detailing principal accountant's fees and services is incorporated by reference from the forthcoming 2023 Proxy Statement - Information is **incorporated by reference** from the forthcoming 2023 Proxy Statement[481](index=481&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=127&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists exhibits and financial statement schedules filed with the report, noting the omission of schedules where information is included elsewhere - This item includes the **financial statements**, **financial statement schedules** (which are omitted), and a **list of exhibits** filed with the report[483](index=483&type=chunk) [Form 10-K Summary](index=127&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no summary for this item - **None**[484](index=484&type=chunk)

Desktop Metal, Inc. (NYSE:DM) Q3 2022 Earnings Conference Call November 9, 2022 4:30 PM ET Company Participants Jay Gentzkow - VP, IR Ric Fulop - Co-Founder & CEO Jason Cole - CFO Conference Call Participants Noelle Dilts - Stifel Shannon Cross - Crédit Suisse Troy Jensen - Lake Street Capital Danny Eggerichs - Craig-Hallum Operator Greetings and welcome to Desktop Metals Third Quarter 2022 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host, ...

Revenue Performance - Total revenue for Q3 2022 was $47.1 million, an increase of $21.7 million or 85% compared to $25.4 million in Q3 2021[273]. - Product revenue accounted for $42.9 million (91% of total revenue) in Q3 2022, up from $23.9 million (94% of total revenue) in Q3 2021, representing a growth of $18.99 million or 79%[271]. - Service revenue increased to $4.1 million (9% of total revenue) in Q3 2022, compared to $1.5 million (6% of total revenue) in Q3 2021, marking a growth of $2.66 million or 179%[271]. - Total revenue for the three months ended September 30, 2022, was $47.1 million, an increase of 85% from $25.4 million in the same period of 2021[276]. - Total revenue for the nine months ended September 30, 2022, was $148.5 million, an increase of 167% from $55.7 million in the same period of 2021[295]. - Product revenue for the nine months ended September 30, 2022, increased by approximately 161%, totaling $135.1 million compared to $51.8 million in 2021[296]. Cost and Expenses - Total cost of sales for the three months ended September 30, 2022, was $47.4 million, reflecting a 120% increase from $21.5 million in the prior year[277]. - Total cost of sales for the nine months ended September 30, 2022, was $141.7 million, a 183% increase from $50.0 million in the prior year[302]. - Research and development expenses increased by 16% to $22.4 million for the three months ended September 30, 2022, compared to $19.3 million in the prior year[283]. - Research and development expenses increased by $32.6 million, or 71%, totaling $78.4 million for the nine months ended September 30, 2022, compared to $45.8 million in 2021[308]. - Sales and marketing expenses rose by $26.7 million, or 90%, reaching $56.3 million for the nine months ended September 30, 2022, compared to $29.6 million in 2021[309]. - General and administrative expenses increased by $15.7 million, or 34%, totaling $62.5 million for the nine months ended September 30, 2022, compared to $46.8 million in 2021[310]. Profitability and Losses - The company incurred net losses of $60.8 million for the three months ended September 30, 2022[253]. - GAAP net loss for the three months ended September 30, 2022, was $60.774 million, compared to a net loss of $66.879 million for the same period in 2021[339]. - The company incurred a net loss of $428.0 million for the nine months ended September 30, 2022, compared to a net loss of $169.2 million for the same period in 2021[340]. - Non-GAAP operating loss for the nine months ended September 30, 2022, was $107.461 million, compared to a loss of $75.343 million for the same period in 2021[332]. - Non-GAAP gross margin for the three months ended September 30, 2022, was $9.387 million, up from $6.811 million in the same period of 2021, representing a 37.5% increase[332]. Cash Flow and Financial Position - Cash used in operating activities was $150.8 million as of September 30, 2022, with cash and cash equivalents totaling $217.3 million[253]. - As of September 30, 2022, the company had $217.3 million in cash, cash equivalents, and short-term investments[341]. - Net cash used in operating activities for the nine months ended September 30, 2022, was $150.8 million, primarily due to $427.2 million in net losses[352]. - The company expects to continue incurring net losses and negative cash flows from operations as it invests in commercialization and new product development[348]. - Future cash requirements will depend on revenue, R&D efforts, and potential acquisitions, with a belief that existing capital resources will support operations for at least the next 12 months[348]. Strategic Initiatives and Acquisitions - The company anticipates $20.0 million in cost savings from a strategic integration and cost optimization initiative in the second half of 2022, with at least $100.0 million in total savings expected by June 2024[257]. - The acquisition of The ExOne Company was completed for a total purchase price of $613.0 million, including $201.4 million in cash and $411.6 million in stock[254]. - The company has invested significant resources in R&D, supported by over 950 patents or pending applications, to enhance its additive manufacturing technologies[247]. - The company operates in over 65 countries, leveraging a global distribution network to market and sell its additive manufacturing solutions[249]. Market Conditions - The ongoing macroeconomic conditions, including inflation and supply chain constraints, are impacting customer purchasing decisions and may extend sales cycles[269]. - The company is exposed to market risks from fluctuations in interest rates and foreign currency translation, which may adversely affect its financial condition[363].

Company and Industry Overview * **Company**: Desktop Metal, Inc. (NYSE:DM) * **Industry**: 3D Printing, Additive Manufacturing * **Focus**: Binder jetting and area-wide photopolymer printing for mass production * **Market**: Expected to reach $100 billion by 2030, with Desktop Metal targeting a double-digit share Key Points * **Technology and Performance**: * Desktop Metal's technology offers significant advantages over legacy manufacturing processes, with throughput over 100 times faster and a doubling of performance every three years. * The company's binder jetting and area-wide photopolymer printing processes are competitive with conventional manufacturing methods. * Desktop Metal's products are used for end-use parts, not just prototyping. * **Market Position and Growth**: * Desktop Metal has a strong market position, with a leading share in binder jetting, digital casting, printed hydraulics, and printed foams. * The company has a large installed base of over 6,000 customers across various industries, including automotive, consumer electronics, healthcare, and defense. * Organic growth in 2021 was 163%. * **Revenue Streams**: * Desktop Metal's business model includes recurring revenue streams from consumables, such as proprietary materials and resins. * The company expects to achieve a 50% gross margin range in the long term. * **Strategic Initiatives**: * Desktop Metal is focused on expanding its recurring revenue streams and increasing its market share. * The company is investing in research and development to continue improving its technology and expanding its material library. * Desktop Metal is working with leading companies and organizations, including BMW, Caterpillar, Tesla, Lockheed Martin, and the Department of Defense, to develop new applications for its technology. Additional Information * Desktop Metal has a strong intellectual property portfolio, with over 650 patents pending and applied for. * The company has a global network of over 250 partners in 65 countries. * Desktop Metal's technology has applications in various industries, including aerospace, automotive, healthcare, and defense. * The company is well-positioned for long-term growth and is targeting $1 billion in revenue by the mid-decade.

Desktop Metal, Inc. (NYSE:DM) Jefferies Industrials Conference August 9, 2022 3:00 PM ET Company Participants Ric Fulop - CEO and Founder Conference Call Participants Andy McCleneghen - Jefferies Andy McCleneghen Good afternoon, everyone, and welcome to the Jefferies 2022 Industrials Conference. My name is Andy McCleneghen. I’m an associate with the investment banking team here at Jefferies. And today, it’s my pleasure to introduce Ric Fulop, who is the Founder and CEO of Desktop Metal. We’ll leave a few mi ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2022 was $57.7 million, representing over 200% year-over-year growth and 32% sequential growth from Q1 2022 [8][30] - Non-GAAP gross margins increased to 26.7%, an improvement of over 170 basis points year-over-year [10][31] - Non-GAAP operating expenses were $46.1 million, representing 80% of revenue, a significant improvement from 162% in Q2 2021 [32] - Adjusted EBITDA for Q2 2022 was negative $27.5 million, showing a sequential improvement of $14.1 million from Q1 2022 [33] Business Line Data and Key Metrics Changes - Revenue performance was driven by strength in metal product platforms and contributions from acquisitions [9][30] - The introduction of FreeFoam, a new 3D printable foam solution, expands Desktop Metal's total addressable market opportunity [12][24] - Strong traction was noted across all metal platforms, including the production system P-50 [17] Market Data and Key Metrics Changes - Desktop Metal is seeing increased adoption from blue-chip customers across various industries, including automotive and aerospace [13][14] - The defense business is growing rapidly, with a potential $15 million contract awarded by the Defense Logistics Agency [16] Company Strategy and Development Direction - The company is focused on strategic integration and cost optimization initiatives, aiming for $40 million in annualized run rate non-GAAP cost savings [21] - The strategic initiative includes a workforce reduction and consolidation of global facilities to increase efficiencies [20] - Desktop Metal aims to maintain a strong balance sheet and improve cash flow breakeven to support long-term growth in the additive manufacturing market [34][40] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed full-year 2022 revenue guidance of approximately $260 million, while closely monitoring macroeconomic conditions [36] - The company expects continued sequential improvement in adjusted EBITDA and aims to exit 2023 breakeven on an adjusted EBITDA basis [37][39] - Management highlighted the strong demand for additive manufacturing solutions, driven by supply chain disruptions and a secular shift towards digital production [52][54] Other Important Information - Desktop Metal has a robust IP portfolio of over 650 patents and pending applications, which the company plans to monetize [17] - The company has achieved undisputed market share leadership in several fast-growing segments of additive manufacturing [41] Q&A Session Summary Question: Changes to the go-to-market strategy - Management indicated no dramatic changes to the go-to-market strategy, emphasizing a more focused effort and strong cross-selling opportunities [43][44] Question: Monetization of the IP portfolio - Management acknowledged the potential value in the IP portfolio and indicated ongoing efforts to monetize it [45] Question: Revenue trends in the back half of the year - Management expects strong demand and a revenue distribution of approximately 40% in the first half and 60% in the second half of the year, with Q4 anticipated to be the strongest [48] Question: Customer activity amid macroeconomic concerns - Management noted that the company benefits from a growing market segment and continues to see strong customer adoption of additive manufacturing solutions [52][54] Question: Progress on the P-50 product - Management confirmed ongoing activity and progress with the P-50 product, with expectations for further announcements [55][57] Question: Cost expectations and share count - Management expects non-GAAP operating expenses to decrease in the second half of the year and provided details on interest expense and share count [58][60]