8-K: Desktop Metal Reports Q2 2024 Results, Announces Merger with Nano Dimension

Desktop Metal's Q2 2024 financial results show a revenue decrease and a significant net loss, alongside the announcement of a definitive merger agreement with Nano Dimension.

Summary

• Desktop Metal announced its second quarter 2024 financial results, revealing a revenue of $38.9 million, down from $53.3 million in the same period last year.
• The company reported a net loss of $(103.4) million, significantly impacted by one-time non-cash charges related to accelerated amortization and depreciation.
• Adjusted EBITDA was $(13.2) million, an improvement from $(15) million in Q2 2023.
• GAAP operating expenses increased to $69.1 million due to accelerated amortization and depreciation, while non-GAAP operating expenses were $27 million, a 22% year-over-year improvement.
• Services revenue increased by 27% to $7.5 million, up from $5.9 million a year ago.
• Desktop Metal also announced a definitive merger agreement with Nano Dimension.
• The company's cash, cash equivalents, and short-term investments closed the quarter at $46.7 million, with a 40% decrease in the rate of operating cash consumption compared to the same quarter last year.
• Due to the pending acquisition, the company has removed financial guidance for the remainder of the year.

Sentiment

Score: 3

Explanation: The document presents a mix of positive and negative information, but the significant revenue decline, large net loss, and the need for a merger due to a weakening financial outlook weigh heavily on the sentiment. The positive aspects, such as improved adjusted EBITDA and cost reductions, are overshadowed by the overall poor financial performance.

Positives

• Adjusted EBITDA improved to $(13.2) million from $(15) million year-over-year.
• Non-GAAP operating expenses decreased by 22% year-over-year.
• Services revenue increased by 27% year-over-year.
• The rate of operating cash consumption decreased by 40% compared to the same quarter last year.
• The company launched the PureSinter Furnace and qualified platinum on its DM Production System.
• Desktop Health validated Flexcera Smile Ultra+ Dental Resin for dental implantology.

Negatives

• Revenue decreased to $38.9 million from $53.3 million year-over-year.
• The company reported a significant net loss of $(103.4) million.
• GAAP gross margin was (83)%, impacted by one-time non-cash charges.
• GAAP operating expenses increased to $69.1 million due to accelerated amortization and depreciation.
• The company removed financial guidance for the remainder of the year due to the pending acquisition.

Risks

• The company faces challenges due to a weakening financial outlook, causing customers to hesitate in closing deals.
• Macroeconomic factors such as rising rates and slowing capex budgets are impacting the business.
• The company is subject to risks related to the completion of the proposed transaction with Nano Dimension.
• There are risks associated with demand for Desktop Metal's products and services, rapid technological change in the additive manufacturing industry, and supply and logistics disruptions.

Future Outlook

The company has removed financial guidance for the remainder of the year due to the pending acquisition by Nano Dimension. The proposed merger is expected to strengthen the company's competitive position and preserve shareholder value.

Management Comments

• Ric Fulop, Founder and CEO of Desktop Metal, stated that the company has worked to align its cost structure with macroeconomic realities and has delivered nine quarters of non-GAAP opex reduction.
• Ric Fulop also noted that the company faced an increasingly challenging business environment due to rising rates and slowing capex budgets.
• Management indicated that customer hesitation to close deals due to the company's weakening financial outlook was a key factor in pursuing the merger with Nano Dimension.

Industry Context

The announcement comes amid a challenging macroeconomic environment impacting the additive manufacturing industry, with rising rates and slowing capital expenditure budgets affecting customer demand and deal closures. The merger with Nano Dimension suggests a consolidation trend in the industry to strengthen competitive positions.

Comparison to Industry Standards

• Desktop Metal's revenue decline of approximately 27% year-over-year is significant and suggests the company is facing headwinds compared to some competitors in the additive manufacturing space.
• Stratasys, a major competitor, reported a 1.6% revenue increase in their most recent quarter, indicating a stronger performance in the current market conditions.
• 3D Systems, another competitor, reported a 10.8% revenue decrease, suggesting that the industry is facing challenges, but Desktop Metal's decline is more pronounced.
• The adjusted EBITDA of $(13.2) million for Desktop Metal is a significant loss, while other companies in the sector have reported positive or less negative EBITDA figures.
• For example, Stratasys reported an adjusted EBITDA of $10.8 million, and 3D Systems reported an adjusted EBITDA of $(1.9) million, highlighting Desktop Metal's relatively weaker profitability.

Stakeholder Impact

• Shareholders face uncertainty due to the significant net loss and the pending merger.
• Employees may experience changes due to the merger and cost reduction plans.
• Customers may be concerned about the company's financial stability and the impact of the merger on product and service offerings.
• Suppliers and creditors may be affected by the company's financial performance and the merger.

Next Steps

• Desktop Metal will host a conference call on July 31, 2024, to discuss the second quarter 2024 results.
• The company intends to file a proxy statement with the SEC in connection with the proposed transaction with Nano Dimension.
• The company will work towards completing the proposed merger with Nano Dimension.

Key Dates

Keywords

Additive Manufacturing, 3D Printing, Merger, Nano Dimension, Financial Results, Revenue, EBITDA, Net Loss, Cost Reduction, Operating Expenses