DM
Desktop Metal, INC
NYSE
DEFA14A: Desktop Metal Announces Merger with Nano Dimension Amidst Financial Challenges
Sentiment:
Earnings Conference Call Transcript
31 July 2024 4:15 PM
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.
Worse than expected
The company's Q2 2024 revenue was down compared to the previous year.
The company's non-GAAP gross margins were down compared to the previous year.
The company's adjusted EBITDA was negative.
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
- December 31, 2023: Date of Nano's Annual Report on Form 20-F.
- December 31, 2023: Date of Desktop Metal's Annual Report on Form 10-K.
- March 21, 2024: Nano's Annual Report on Form 20-F was filed with the SEC.
- April 23, 2024: Desktop Metal's proxy statement for its 2024 Annual Meeting of Stockholders was filed with the SEC.
- July 31, 2024: Date of the Desktop Metal Second Quarter 2024 Earnings Conference Call.
Keywords
Nano Dimension, merger, additive manufacturing, financial performance, Desktop Metal
DM
Desktop Metal, INC
NYSE
Sector: TBD
Filings with Classifications
Worse than expected
26 March 2025 5:20 PM
8-K Filing
- Revenue decreased from $189.7 million to $148.8 million year-over-year.
Worse than expected
31 October 2024 7:00 AM
Quarterly Report
- The company's revenue decreased by 15% year-over-year.
- The company reported a net loss of $35.4 million for the quarter and $191.0 million for the first nine months.
- The company's gross margin, while improved, is still relatively low at 9%.
Capital raise
31 October 2024 7:00 AM
Quarterly Report
- The company may need to raise additional capital through arrangements with Nano or from other sources, including equity and debt financings.
- The company has a multi-draw term loan credit facility with Nano for up to $20 million, available after January 7, 2025.
- The company may need to issue additional shares of capital stock or offer debt or other equity securities if the merger is not completed.
Worse than expected
23 September 2024 4:24 PM
Proxy Statement
- The company warns of potential dilutive financings or bankruptcy if the merger fails.
- Desktop Metal expects to run out of cash by the end of the first quarter of 2025 if the merger is not approved.
Worse than expected
13 September 2024 4:02 PM
Proxy Statement
- The company expects to run out of cash by the end of the first quarter 2025 if the merger is not approved.
- The company may need to undertake financings that may be severely dilutive to stockholders if the merger is not approved.
- There is a risk of bankruptcy if the merger is not approved.
Capital raise
13 September 2024 4:02 PM
Proxy Statement
- The document mentions that if the merger is not approved, Desktop Metal may need to undertake financings.
- These financings may be severely dilutive to stockholders.
Worse than expected
6 September 2024 4:38 PM
Proxy Statement
- Desktop Metal expects to run out of cash by the end of the first quarter of 2025 if the merger is not approved.
Capital raise
15 August 2024 7:00 AM
Definitive Proxy Statement
- The merger agreement includes a provision for a multi-draw term loan credit facility (Bridge Loan Facility) from Nano to Desktop Metal, up to $20 million, to provide working capital and liquidity.
Worse than expected
31 July 2024 4:15 PM
Earnings Conference Call Transcript
- The company's Q2 2024 revenue was down compared to the previous year.
- The company's non-GAAP gross margins were down compared to the previous year.
- The company's adjusted EBITDA was negative.
Capital raise
30 July 2024 4:53 PM
Quarterly Report
- The company plans to raise additional capital through a combination of potential options, including equity and debt financings.
- Nano Dimension agreed to provide a multi-draw term loan credit facility in an aggregate principal amount not to exceed $20.0 million, subject to certain conditions.
Worse than expected
30 July 2024 4:53 PM
Quarterly Report
- The company's revenue decreased by 27% compared to the same quarter last year.
- The company's gross margin was -83%, indicating significant losses on sales.
- The company's net loss increased significantly compared to the same quarter last year.
Worse than expected
30 July 2024 4:36 PM
Quarterly Report
- Revenue decreased from $53.3 million to $38.9 million compared to the same quarter last year.
- The company reported a net loss of $(103.4) million.
Worse than expected
30 July 2024 4:35 PM
Quarterly Report
- The company's revenue decreased significantly year-over-year.
- The company reported a substantial net loss, primarily due to one-time non-cash charges.
- The company's GAAP gross margin was negative, indicating poor profitability.
Worse than expected
3 July 2024 4:24 PM
Merger Announcement
- The combined company expects negative cash flow for the next six to eight quarters.
Delay expected
3 July 2024 4:24 PM
Merger Announcement
- The transaction is expected to close at the end of the year, but based on delays, maybe a few months later.
Capital raise
3 July 2024 7:32 AM
Merger Announcement
- Nano Dimension has committed to providing Desktop Metal with a $20 million secured loan facility if the closing of the transaction extends into 2025.
- The purchase price may be adjusted based on the amount drawn from the loan facility prior to closing.
Worse than expected
3 July 2024 7:32 AM
Merger Announcement
- The final purchase price is subject to downward adjustments based on transaction expenses and potential draws on a loan facility, which could reduce the value of the deal for Desktop Metal shareholders.
Delay expected
3 July 2024 7:32 AM
Merger Announcement
- The closing of the transaction is expected in the fourth quarter of 2024, but is subject to customary closing conditions, including regulatory approvals, which could cause delays.
Worse than expected
9 May 2024 6:02 AM
Quarterly Report
- The company's revenue decreased by 2% year-over-year, indicating worse than expected sales performance.
- The company reported a gross loss of $2.2 million, indicating worse than expected profitability.
- The company's net loss of $52.1 million was significant, indicating worse than expected financial results.
Capital raise
9 May 2024 6:02 AM
Quarterly Report
- The company entered into an Open Market Sale Agreement with Cantor Fitzgerald & Co. to sell shares of common stock for an aggregate offering price of up to $75.0 million.
- The company may need to further increase its capital resources by issuing additional shares of its capital stock or offering debt or other equity securities.
Better than expected
9 May 2024 6:00 AM
Quarterly Report
- The company's adjusted EBITDA improved by 44% year-over-year, indicating better than expected cost management.
- Non-GAAP operating expenses decreased for nine consecutive quarters, showing better than expected cost control.
- Cash consumption decreased by 47% year-over-year, demonstrating better than expected cash management.
Capital raise
23 April 2024 7:15 AM
Proxy Statement
- The company may offer common and preferred stock, debt securities, warrants, and units of up to $250.0 million in the aggregate under a shelf registration statement.
- The company may sell shares of its Class A common stock having aggregate sales proceeds of up to $75.0 million pursuant to an at the market offering program.
- The company intends to raise capital through equity or debt financing to fund its current operations.
Worse than expected
23 April 2024 7:15 AM
Proxy Statement
- The company needs to implement a reverse stock split to regain compliance with the NYSE minimum bid price requirement, indicating that the share price has fallen below acceptable levels.
Capital raise
15 March 2024 4:12 PM
Annual Results
- The company may need to further increase its capital resources by issuing additional shares of its capital stock or offering debt or other equity securities.
- The company may not be able to obtain additional financing on terms favorable to it, if at all.
Worse than expected
15 March 2024 4:12 PM
Annual Results
- The company experienced a net loss of $323.3 million in 2023, which is worse than the previous year.
- The company's revenue decreased by 9% in 2023 compared to 2022.
- The company's gross profit decreased by $25.2 million in 2023 compared to 2022.
Better than expected
15 March 2024 7:00 AM
Quarterly Report
- The company's net loss significantly decreased year-over-year, indicating improved financial performance.
- Adjusted EBITDA showed a substantial improvement, reaching the company's strongest quarterly performance to date.
- Non-GAAP gross margins improved significantly year-over-year.
Worse than expected
24 January 2024 8:05 AM
Strategic Business Review
- The company is implementing a significant workforce reduction and restructuring plan, indicating that the current financial performance is worse than expected.
- The company is facing a downturn in the additive manufacturing industry and a softer demand environment, which are contributing to the need for these cost-cutting measures.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.