Desktop Metal, Inc. (DM) is a pioneering force in the world of additive manufacturing, leveraging its proprietary technologies to revolutionize the way industries approach production. Founded in 2015, the company has rapidly emerged as a leader in the Additive Manufacturing 2.0 space, offering a comprehensive portfolio of integrated solutions that cater to a diverse range of applications and industries.
Innovation and Intellectual Property
At the heart of Desktop Metal's success is its unwavering commitment to innovation. The company has invested heavily in research and development, accumulating an extensive portfolio of over 800 patents and pending patent applications. This intellectual property serves as the foundation for Desktop Metal's game-changing technologies, which aim to make additive manufacturing a more accessible, economic, and scalable solution for businesses across the globe.
Strategic Acquisitions and Challenges
Desktop Metal's journey has been marked by strategic acquisitions and expansions that have significantly broadened its technological capabilities and market reach. In 2020, the company completed the acquisition of EnvisionTEC, a pioneer in digital dental biofabrication, which expanded Desktop Metal's portfolio of 3D printing technologies and materials. However, this acquisition was not without challenges, as the company faced a whistleblower investigation at EnvisionTEC and the resignation of EnvisionTEC's CEO prior to the ExOne stockholder vote in 2023, leading to a class action lawsuit.
Building on its growth strategy, Desktop Metal acquired The ExOne Company in 2021, a pioneer in binder jetting and single-pass inkjet additive manufacturing solutions. This acquisition further strengthened Desktop Metal's position in the additive manufacturing market, although the integration of ExOne's business and operations into Desktop Metal encountered some difficulties and delays.
Strategic Integration and Cost Savings
In response to various challenges and to optimize its operations, Desktop Metal implemented a strategic integration and cost savings initiative in 2022, known as the "2022 Initiative". This comprehensive plan aimed to streamline the company's operational structure, reduce operating expenses, and improve cash flow management. The initiative included a global workforce reduction, facilities consolidation, and other operational savings measures. As a result, Desktop Metal successfully realized $20.7 million in cost savings in the second half of 2022 and achieved its goal of $100 million in annualized cost savings in 2023.
Product Offerings and Market Reach
Desktop Metal's product offerings span the entire product life cycle, from product development to mass production and aftermarket operations. The company's additive manufacturing platforms leverage its proprietary technologies to deliver breakthrough print speeds, competitive part costs, accessible workflows, and support for an extensive library of qualified materials. These advantages have helped Desktop Metal overcome the traditional barriers to adopting additive manufacturing, unlocking new applications where conventional manufacturing methods have historically held cost and volume advantages.
The company's global footprint extends to over 40 countries, with a distribution network composed of seasoned sales and distribution professionals. This hybrid approach to marketing and sales, combined with Desktop Metal's internal manufacturing and supply chain teams, allows the company to produce, sell, and service its products at scale in global markets. This strategy has enabled Desktop Metal to create substantial operating leverage as it executes its growth strategy.
Produced Parts Services
In addition to its hardware offerings, Desktop Metal also provides produced parts services, directly manufacturing parts for sale to customers. This enables the company to offer a more holistic suite of solutions, accelerating the adoption of its Additive Manufacturing 2.0 technologies across select high-value production applications, or "killer apps," such as medical and dental devices and fluid power systems. These produced parts services not only generate a high-margin revenue stream but also facilitate lead generation for Desktop Metal's additive manufacturing systems at scale, while enabling the development of new materials and specialized applications ahead of broader market introduction.
Resilience and Adaptation
Despite the challenges posed by the COVID-19 pandemic, Desktop Metal has remained steadfast in its mission to drive the adoption of additive manufacturing. The company has implemented strategic integration and cost optimization initiatives, including a global workforce reduction, facilities consolidation, and other operational savings measures, to ensure its long-term financial sustainability and position it for continued growth.
Merger with Nano Dimension
In July 2024, Desktop Metal announced that it had entered into a merger agreement with Nano Dimension Ltd. (NNDM), a leading supplier of Additively Manufactured Electronics and multi-dimensional polymer, metal, and ceramic Additive Manufacturing 3D printing solutions. This transformative transaction, which is expected to close in the fourth quarter of 2024, subject to regulatory approvals and other customary closing conditions, will create a powerhouse in the additive manufacturing industry, combining the strengths and complementary technologies of both companies.
Financials
Desktop Metal's financial performance has been impacted by the broader macroeconomic conditions. For the fiscal year 2023, the company reported revenue of $189.70 million, demonstrating its ability to generate substantial top-line growth. However, the company recorded a net loss of $323.27 million for the same period. The annual operating cash flow was -$114.99 million, and the annual free cash flow stood at -$117.76 million.
In the most recent quarter (Q3 2024), Desktop Metal reported revenue of $36.41 million, representing a 15% decrease year-over-year. This decline was primarily attributed to a reduction in units shipped, driven by macroeconomic conditions impacting the additive manufacturing industry. The net loss for the quarter was $35.45 million.
Desktop Metal's business is organized into two main segments: Additive Manufacturing Solutions and Parts Production. In the first nine months of 2024, the Additive Manufacturing Solutions segment generated $98.98 million in revenue, accounting for 85% of the company's total revenue. The Parts Production segment contributed $16.96 million, representing 15% of the total revenue.
The company has a significant international presence, deriving approximately 37% of its revenues from countries outside the United States in 2023.
Liquidity
As of September 30, 2024, Desktop Metal's liquidity position showed $30.62 million in cash and cash equivalents. The company had a debt-to-equity ratio of 0.59, a current ratio of 2.34, and a quick ratio of 1.02. These financial metrics provide insight into the company's ability to meet its short-term obligations and maintain financial flexibility.
Business Overview and Legal Challenges
Desktop Metal is facing several legal challenges, including a class action lawsuit alleging breach of fiduciary duty in connection with the ExOne acquisition and purported securities class action complaints alleging false or misleading statements regarding a subsidiary. These legal matters underscore the importance of effective corporate governance and transparent communication with stakeholders.
The additive manufacturing industry is characterized by rapid technological change, with the dental 3D printing market expected to grow at a compound annual growth rate (CAGR) of over 19% from 2023 to 2029. To stay at the forefront of this dynamic industry, Desktop Metal continues to invest heavily in research and development, focusing on innovation and expanding its technological capabilities.
Future Outlook
Looking ahead, Desktop Metal remains well-positioned to capitalize on the growing demand for additive manufacturing solutions. The company's focus on developing cutting-edge technologies, cultivating strategic partnerships, and expanding its global reach positions it as a formidable player in the industry. As Desktop Metal continues to unlock new applications and drive the adoption of Additive Manufacturing 2.0, investors and industry observers alike will closely follow the company's evolution and its impact on the manufacturing landscape.
The company's ability to navigate the challenges posed by macroeconomic conditions, successfully integrate its acquisitions, and leverage its innovative technologies across various industries will be crucial in determining its future success. With a strong commitment to research and development and a comprehensive portfolio of additive manufacturing solutions, Desktop Metal is poised to play a significant role in shaping the future of manufacturing.