Desktop Metal(DM) - 2022 Q4 - Annual Report

Part I Business 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] - 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][38][44] - 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][45][49] - 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][92] - As of December 31, 2022, the company had over 1,200 employees, with a majority engaged in research and development and related functions[99] Risk Factors 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] - 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][124] - The company faces difficulties in integrating acquired businesses like EnvisionTEC and ExOne, which could disrupt operations and prevent the realization of anticipated benefits[185] - 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] - 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][221] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[284] Properties 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][286] - 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] Legal Proceedings 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][293] - 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] - Desktop Metal states its belief that all current legal complaints are without merit and plans to defend its position vigorously[296] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[297] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - The company has a policy of not paying dividends and intends to retain all future earnings to fund business operations and growth[301] 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 This section is not applicable as per the report - Not applicable[307] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][413] - A strategic integration and cost optimization initiative was implemented, which is expected to generate annualized cost savings of $100 million in 2023[316][317] - 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][360] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] - The company does not currently use derivative financial instruments for trading, speculative, or hedging purposes[452][454] Financial Statements and Supplementary Data 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][507] 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 The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - None[456] Controls and Procedures 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] - Material weaknesses were identified in all five components of the COSO framework: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring[461][462][463][464][465] - 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][468][469] Other Information The company reports no other information for this item - None[473] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable[474] Part III Directors, Executive Officers and Corporate Governance 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] Executive Compensation 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] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] Certain Relationships and Related Transactions, and Director Independence 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] Principal Accountant's Fees and Services 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] Part IV Exhibits and Financial Statement Schedules 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] Form 10-K Summary The company reports no summary for this item - None[484]