Desktop Metal, Inc. (NYSE:DM) Q2 2023 Earnings Conference Call August 3, 2023 4:30 PM ET Company Participants Jay Gentzkow - VP, IR Ric Fulop - Co-Founder, CEO & Director Jason Cole - CFO & Treasurer Conference Call Participants Gregory Palm - Craig-Hallum Operator Greetings, and welcome to Desktop Metals Second Quarter 2023 Financial Results Conference Call. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Mr. Jay Gentzkow, Vice ...

Financial Performance - Q2 2023 revenue reached $53.3 million[53], a 29% increase quarter-over-quarter[54, 93] - Gross margin for Q2 2023 was 31%[41, 95], expanding by 1300 bps (13%) sequentially from Q1 2023[1, 76] and 435 bps (4.35%) year-over-year[3, 95] - Adjusted EBITDA improved by $12.5 million year-over-year to $(15.0) million in Q2 2023[4, 42, 102] - Operating expenses (non-GAAP) decreased by $11.4 million from Q2 2022[78] Cost Savings and Profitability - The company is on track to achieve $100 million in annualized cost savings[67, 68] - Six production facility closures were completed by the end of Q2[5, 68] - The company is committed to achieving adjusted EBITDA breakeven by the end of 2023[5, 45, 60, 86, 104] Market and Strategic Focus - The company is a market leader in AM 2.0 processes for mass production[8] - The company is focused on strategic markets including Giga Casting for automotive, electric vehicles, and large aerospace printed castings[23, 24] - The company has a combined business expected to generate over $300 million adjusted EBITDA in 2026 (~20% pro forma margin)[61] Partnerships and Innovation - The company has a supply agreement with Carbon3D for Flexcera materials[5, 120] - The company is growing its business with Align Technology[5] - The company is committed to a combination with Stratasys[5]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-38835 DESKTOP METAL, INC. (Exact name of registrant as specified in its charter) Delaware 83-2044042 (State of Other Jurisdiction of incorporation or Organ ...

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].