DEFA14A: Desktop Metal Announces Merger with Nano Dimension Amidst Financial Challenges

Desktop Metal is set to merge with Nano Dimension in a bid to overcome financial headwinds and create a leading entity in the additive manufacturing space.

Summary

• Desktop Metal has announced a proposed business combination with Nano Dimension.
• This decision was driven by financial challenges, including rising interest rates, slowing CapEx budgets, and customer hesitancy due to Desktop Metal's weakening financial outlook.
• The company has reduced non-GAAP operating expenses by 48% since Q1 2022 and improved non-GAAP gross margins.
• However, the company faced an increasingly challenging business environment, leading to balance sheet pressure and limited investment in growth and innovation.
• The merger with Nano Dimension is expected to create a leader in additive manufacturing with a stronger balance sheet and a more complete product portfolio.
• The transaction offered a 27% premium at the time of announcement, subject to adjustment.
• Consolidated revenue for Q2 2024 was $38.9 million, compared to $53.3 million in Q2 2023.
• Non-GAAP gross margins were 29.2% for Q2 2024, compared to 31% in the prior year period.
• Adjusted EBITDA for Q2 2024 was negative $13.2 million, improving year-over-year by $1.8 million.
• The company closed Q2 with $46.7 million in cash, with outflows elevated due to deal-related spend.
• Desktop Metal is no longer providing guidance for the remainder of 2024 due to the pending acquisition.

Sentiment

Score: 5

Explanation: The document conveys a mixed sentiment. While the merger with Nano Dimension is presented as a positive strategic move, the underlying financial challenges and declining revenue indicate a concerning situation. The sentiment is neutral overall, reflecting the uncertainty surrounding the merger's success.

Positives

• The merger with Nano Dimension is expected to create a leader in the additive manufacturing space.
• The merger is expected to provide a 27% premium to Desktop Metal shareholders at the time of announcement, subject to adjustment.
• The company has reduced non-GAAP operating expenses by 48% since Q1 2022.
• The merger is expected to accelerate the industry's transition into mass production.
• The merger is expected to create a well-capitalized company with a stronger financial profile.

Negatives

• Desktop Metal faced an increasingly challenging business environment due to rising interest rates and slowing CapEx budgets.
• Customers were hesitant to engage in closing deals due to Desktop Metal's weakening financial outlook.
• Q2 2024 revenue was $38.9 million, down from $53.3 million in Q2 2023.
• Non-GAAP gross margins were 29.2% for Q2 2024, compared to 31% in the prior year period.
• Adjusted EBITDA for Q2 2024 was negative $13.2 million.

Risks

• The ultimate outcome of the proposed transaction between Desktop Metal and Nano Dimension is uncertain.
• The announcement of the proposed transaction could affect Desktop Metal's ability to operate its business and retain key personnel.
• The timing of the proposed transaction is uncertain.
• The ability to satisfy closing conditions to the completion of the proposed transaction is uncertain.
• The company's stockholders may reject the proposed transaction.

Future Outlook

Desktop Metal is no longer providing guidance for the remainder of 2024 due to the pending acquisition with Nano Dimension.

Management Comments

• Ric Fulop stated that the merger with Nano Dimension represents the best path forward for Desktop Metal shareholders.
• Jason Cole expressed confidence that the transaction represents the best option for all stakeholders.
• Ric Fulop mentioned that the company had discussions with 10 different companies on potential combinations over the past two-and-a-half years.

Industry Context

The additive manufacturing industry faces challenges in achieving profitability and scale, as highlighted by the struggles of other public companies in the sector.

Comparison to Industry Standards

• The document mentions that profitability has been elusive across all the public companies in the additive sector.
• Four western publicly traded companies in additive manufacturing have failed or were delisted in the last two quarters.
• The document suggests that scale with the right portfolio, balance sheet, technology, and go-to-market is required to build a sustainable company in this industry.

Stakeholder Impact

• The merger is expected to benefit shareholders by providing a 27% premium at the time of announcement, subject to adjustment.
• The merger is expected to benefit customers by creating a stronger entity with a more complete product portfolio.
• The merger is expected to benefit employees by creating a more stable and well-capitalized company.

Next Steps

• The company intends to file a proxy statement with the SEC regarding the proposed transaction.
• The company will seek stockholder approval for the proposed transaction.
• The company will work to satisfy closing conditions to complete the proposed transaction.

Key Dates

Keywords

Nano Dimension, merger, additive manufacturing, financial performance, Desktop Metal