Desktop Metal(DM) - 2024 Q2 - Quarterly Results

Executive Summary CEO Statement and Strategic Outlook CEO highlighted consistent expense reductions and proposed Nano Dimension merger as a strategic response to macroeconomic challenges - Desktop Metal has achieved nine consecutive quarters of non-GAAP operating expense reduction and significantly lowered its cash burn since the beginning of 2022[3] - The company is navigating an increasingly challenging business environment characterized by rising interest rates, slowing capital expenditure budgets, and other macroeconomic pressures, resulting in customer hesitancy to finalize deals[4] - A definitive merger agreement with Nano Dimension has been announced, which is considered the best strategic direction to enhance competitive standing and safeguard shareholder value[5][6] About Desktop Metal Desktop Metal leads Additive Manufacturing 2.0, enabling digital mass production with innovative 3D printers and materials - Desktop Metal is a global leader in Additive Manufacturing 2.0, specializing in on-demand, digital mass production for industrial, medical, and consumer products[11] - The company's technology leverages binder jetting and digital light processing to print with diverse materials such as metal, polymer, sand, ceramics, foam, and recycled wood[11] Second Quarter 2024 Business and Financial Highlights Corporate Highlights Desktop Metal continued cost reduction efforts and announced a definitive merger agreement with Nano Dimension - The company continued to execute cost reduction plans to align its business structure with the current 3D printing market conditions[5] - A definitive merger agreement for a proposed business combination with Nano Dimension was announced[6] Product Performance Q2 2024 saw the launch of PureSinter™ Furnace, platinum qualification on DM Production System, and Flexcera® Smile Ultra+ validation - Launched and began selling the all-new PureSinter™ Furnace for high-purity debinding and sintering of metal parts, with the first unit sold to AmPd Labs[10] - Platinum is now customer-qualified on the DM Production System binder jet 3D printing platform by Legor for jewelry and fashion markets[10] - Installed the fourth Figur G-15 Digital Sheet Forming system to Wisconsin-Based Evology Manufacturing[10] - Desktop Health® announced Flexcera® Smile Ultra+ Dental Resin is validated for 3D printing strong and lifelike teeth restorations for All-on-X implant provisionals[10] Key Financial Highlights (GAAP & Non-GAAP) Q2 2024 revenue decreased 27% to $38.9 million, GAAP net loss widened, Adjusted EBITDA improved 12% Key Financial Highlights | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (YoY) | | :----- | :----------------- | :----------------- | :----------- | | Revenue | $38.9 | $53.3 | (27.0%) | | Net Loss (GAAP) | $(103.4) | $(49.7) | (108.0%) | | Adjusted EBITDA | $(13.2) | $(15.0) | 12.0% improvement | | Services Revenue | $7.5 | $5.9 | 27.1% | | GAAP Operating Expenses | $69.1 | $54.6 | 26.6% | | Non-GAAP Operating Expenses | $27.0 | $34.7 | (22.3%) | | GAAP Gross Margin | (83)% | 11.4% | N/A | | Non-GAAP Gross Margin | 29.2% | 31.0% | (1.8%) | - The Q2 2024 net loss of $(103.4) million was significantly impacted by one-time noncash charges related to accelerated amortization and depreciation on certain intangible and fixed assets[6][10] - Cash, cash equivalents, and short-term investments totaled $46.7 million at the end of Q1 2024, with the rate of operating cash consumption decreasing by 40% compared to the prior year's quarter[10] - Financial guidance for the remainder of the year has been removed due to the pending acquisition by Nano Dimension[10] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets Total assets decreased to $306.5 million by June 30, 2024, driven by reductions in cash and intangible assets, leading to a significant decline in stockholders' equity Condensed Consolidated Balance Sheets | Metric | June 30, 2024 (Thousands) | December 31, 2023 (Thousands) | Change (Thousands) | | :----- | :------------------------ | :-------------------------- | :----------------- | | Total Assets | $306,492 | $458,001 | $(151,509) | | Cash and cash equivalents | $45,855 | $83,845 | $(37,990) | | Intangible assets, net | $80,390 | $168,259 | $(87,869) | | Total Liabilities | $206,651 | $216,349 | $(9,698) | | Total Stockholders' Equity | $99,841 | $241,652 | $(141,811) | Condensed Consolidated Statements of Operations Q2 2024 total revenues were $38.9 million, resulting in a gross loss of $(32.2) million and a net loss of $(103.4) million Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2024 (Thousands) | Three Months Ended June 30, 2023 (Thousands) | Change (Thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | :----------------- | | Total Revenues | $38,932 | $53,286 | $(14,354) | | Products Revenue | $31,411 | $47,398 | $(15,987) | | Services Revenue | $7,521 | $5,888 | $1,633 | | Gross profit (loss) | $(32,189) | $6,089 | $(38,278) | | Total operating expenses | $69,138 | $54,607 | $14,531 | | Loss from operations | $(101,327) | $(48,518) | $(52,809) | | Net loss | $(103,440) | $(49,728) | $(53,712) | | Net loss per share—basic and diluted | $(3.13) | $(1.55) | $(1.58) | - The significant increase in cost of products from $43.2 million in Q2 2023 to $67.2 million in Q2 2024 was a primary contributor to the reported gross loss[20] Condensed Consolidated Statements of Comprehensive Loss Total comprehensive loss for Q2 2024 increased to $(103.9) million, primarily due to the net loss and foreign currency adjustments Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended June 30, 2024 (Thousands) | Three Months Ended June 30, 2023 (Thousands) | Change (Thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | :----------------- | | Net loss | $(103,440) | $(49,728) | $(53,712) | | Foreign currency translation adjustment | $(500) | $(1,316) | $816 | | Total comprehensive loss | $(103,940) | $(50,896) | $(53,044) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity significantly declined to $99.8 million by June 30, 2024, primarily due to the net loss Condensed Consolidated Statements of Stockholders' Equity | Metric | June 30, 2024 (Thousands) | January 1, 2024 (Thousands) | Change (Thousands) | | :----- | :------------------------ | :-------------------------- | :----------------- | | Total Stockholders' Equity | $99,841 | $241,652 | $(141,811) | | Accumulated Deficit | $(1,787,763) | $(1,632,225) | $(155,538) | | Additional Paid-in Capital | $1,923,978 | $1,908,533 | $15,445 | - The accumulated deficit increased by $155.5 million for the six months ended June 30, 2024, directly reflecting the net loss incurred during this period[22] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities decreased to $(37.4) million for the six months ended June 30, 2024, while overall cash decreased by $(38.0) million Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2023 (Thousands) | Change (Thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------------- | | Net cash used in operating activities | $(37,432) | $(70,494) | $33,062 | | Net cash provided by investing activities | $1,013 | $110,883 | $(109,870) | | Net cash (used in) provided by financing activities | $(534) | $721 | $(1,255) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(38,008) | $41,183 | $(79,191) | | Cash, cash equivalents, and restricted cash at end of period | $46,682 | $123,096 | $(76,414) | - Depreciation and amortization significantly increased to $96.0 million for the six months ended June 30, 2024, from $27.0 million in the prior year, contributing to the reduction in net cash used in operating activities[24] Non-GAAP Financial Information Non-GAAP Measures Definitions and Rationale Desktop Metal uses non-GAAP measures to provide a clearer view of ongoing operations, excluding specific non-cash and non-recurring items - Desktop Metal's management uses non-GAAP financial measures (including gross margin, operating loss, net loss, operating expense, EBITDA, and Adjusted EBITDA) to evaluate ongoing operations and for internal planning and forecasting[26] - These non-GAAP measures exclude the effects of stock-based compensation, amortization of acquired intangible assets, restructuring, and acquisition-related and integration costs[26] - The company cautions that non-GAAP measures should be considered supplemental to GAAP results and not as substitutes, acknowledging potential future expenses similar to those excluded[29] Non-GAAP Reconciliation Tables Non-GAAP Gross Margin, Operating Loss, and Net Loss Reconciliation Non-GAAP gross margin was $11.4 million (29.2%) in Q2 2024, with non-GAAP operating and net losses showing improvement Non-GAAP Gross Margin, Operating Loss, and Net Loss Reconciliation | Metric | Three Months Ended June 30, 2024 (Thousands) | Three Months Ended June 30, 2023 (Thousands) | Change (Thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | :----------------- | | GAAP gross margin | $(32,189) | $6,089 | $(38,278) | | Non-GAAP gross margin | $11,361 | $16,529 | $(5,168) | | GAAP operating loss | $(101,327) | $(48,518) | $(52,809) | | Non-GAAP operating loss | $(15,638) | $(18,149) | $2,511 | | GAAP net loss | $(103,440) | $(49,728) | $(53,712) | | Non-GAAP net loss | $(17,254) | $(19,252) | $1,998 | - Key adjustments reconciling GAAP to non-GAAP figures included $65.9 million for amortization of acquired intangible assets and $11.2 million for restructuring expense in Q2 2024[32] Non-GAAP Operating Expense Reconciliation Non-GAAP operating expenses for Q2 2024 were $27.0 million, representing a 22.3% year-over-year improvement Non-GAAP Operating Expense Reconciliation | Metric | Three Months Ended June 30, 2024 (Thousands) | Three Months Ended June 30, 2023 (Thousands) | Change (Thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | :----------------- | | GAAP operating expenses | $69,138 | $54,607 | $14,531 | | Non-GAAP operating expenses | $26,999 | $34,678 | $(7,679) | - Non-GAAP operating expenses showed a 22% year-over-year improvement, reflecting the company's ongoing cost reduction efforts[6][35] Non-GAAP Adjusted EBITDA Reconciliation Adjusted EBITDA for Q2 2024 improved to $(13.2) million, a 12% year-over-year improvement, driven by significant adjustments Non-GAAP Adjusted EBITDA Reconciliation | Metric | Three Months Ended June 30, 2024 (Thousands) | Three Months Ended June 30, 2023 (Thousands) | Change (Thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | :----------------- | | Net loss attributable to common stockholders | $(103,440) | $(49,728) | $(53,712) | | EBITDA | $(29,547) | $(35,066) | $5,519 | | Adjusted EBITDA | $(13,208) | $(15,047) | $1,839 | - Adjusted EBITDA improved by 12% year-over-year, reflecting the impact of cost reduction plans and adjustments for non-cash charges[6][37] - In Q2 2024, incremental depreciation of $3.9 million and amortization of $59.9 million were recorded as restructuring charges due to the Photopolymer Initiative[37] Other Information Conference Call Details Desktop Metal hosted a conference call on July 31, 2024, to discuss its second quarter 2024 financial results - A conference call was held on July 31, 2024, at 8:30 am ET to discuss the second quarter 2024 financial results[9] - Access to the simultaneous webcast and replay is available through the Events & Presentations section of ir.desktopmetal.com/[9] Forward-looking Statements This press release contains forward-looking statements subject to various risks and uncertainties, with no obligation for updates - The press release includes forward-looking statements regarding future results, financial position, business strategy, and the expected benefits of the proposed transaction with Nano Dimension[12] - These statements are subject to risks and uncertainties such as global macroeconomic conditions, technological changes in additive manufacturing, and supply and logistics disruptions[12] - Readers are cautioned not to place undue reliance on forward-looking statements, and Desktop Metal does not intend to update or revise them[12] No Offer or Solicitation This press release does not constitute an offer to buy or sell securities or a solicitation of any vote or approval - The press release is not an offer to buy or sell securities, nor a solicitation of any vote or approval[13][14] - Any offering of securities will be made exclusively through a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended[14] Additional Information about the Transaction Desktop Metal will file a proxy statement and other relevant documents with the SEC regarding the proposed transaction - Desktop Metal intends to file a proxy statement and other relevant documents with the SEC regarding the proposed transaction[15] - Investors are urged to read these documents for important information, which will be available on the SEC's website (http://www.sec.gov) and Desktop Metal's investor relations website (https://ir.desktopmetal.com/sec-filings/all-sec-filings)[15](index=15&type=chunk) Participants in the Solicitation Desktop Metal, Nano Dimension, and their respective directors and executive officers may be considered participants in the proxy solicitation - Desktop Metal, Nano Dimension, and their respective directors and executive officers may be deemed participants in the solicitation of proxies for the proposed transaction[16] - Information about Desktop Metal's directors and executive officers is available in its 2024 Annual Meeting proxy statement, and Nano Dimension's in its Form 20-F[16] Investor and Media Relations Contact information is provided for investor relations and media inquiries - Investor Relations contact: (857) 504-1084 or DesktopMetalIR@icrinc.com[17] - Media Relations contact: Sarah Webster at (313) 715-6988 or sarahwebster@desktopmetal.com[17]