Desktop Metal Q2 2024 Financial Report: Revenue Drops, EBITDA Loss Narrows Amid Strategic Adjustments
On August 4, 2024, Xpiens learned that during its acquisition by Nano Dimension, Desktop Metal released its Q2 2024 financial report. The company reported revenue of $38.9 million, a 27% decrease from $53.3 million in the same period last year, and a net loss of $103.4 million.
Despite these challenges, the company’s adjusted EBITDA loss narrowed from $15 million in Q2 2023 to $13.2 million, indicating progress toward reducing losses and approaching profitability.
Desktop Metal’s operating expenses increased to $69.1 million, primarily due to accelerated depreciation and amortization of certain assets. Ongoing cost-cutting measures are crucial for the company's strategy, helping align its operations with the current macroeconomic environment.
In an investor earnings call, Desktop Metal CEO Ric Fulop stated that the executive team had to make tough decisions, reducing non-GAAP operating expenses by 48% since Q1 2022 while "significantly strengthening non-GAAP gross margins."
Ric Fulop commented, “By the end of Q1, Desktop Metal had achieved nine quarters of operating expense reductions, significantly lowering cash consumption. The company has strategically adjusted its operations to adapt to a lower growth environment driven by 11 interest rate hikes, showing notable progress in terms of profitability.”
Despite this, Desktop Metal continues to face a challenging business environment due to rising interest rates and slowed capital expenditure budgets. Although Fulop highlighted the immense potential of additive manufacturing (AM) and its continued growth over the next decade, he also noted the significant financial pressure the company has faced since mid-2022.
Fulop further mentioned, “Seeing the balance sheet continuously under pressure has limited Desktop Metal’s ability to invest in innovation. By the end of Q2, a concerning trend emerged where customers hesitated to finalize transactions due to the company's weak financial outlook, making it harder to achieve profitability targets.
This market feedback underscores the need for action, and it is increasingly clear that operating as an independent company with a constrained balance sheet is not a viable long-term strategy.”
Market feedback highlighted the necessity for substantial action, leading to the proposed merger with Nano Dimension. By integrating complementary product lines and technologies, the new entity will benefit from increased scale, stronger financial standing, and enhanced competitiveness.
Following the failed merger attempt with Stratasys, Desktop Metal began exploring other strategic options in 2023 to improve its financial situation and competitive position within the industry.
Ric Fulop stated, “Desktop Metal explored raising additional funds to strengthen the balance sheet, but available financing options would cause significant shareholder dilution or cede control through structured debt, severely damaging remaining equity value. Short-selling activities exacerbated this issue, significantly lowering equity value.
When evaluating options, the broader context of the AM industry must be considered. Notably, no publicly listed AM company has achieved profitability. Over the past two quarters, four publicly listed AM companies have either gone bankrupt or been delisted, and deteriorating market conditions have led to more severe equity value losses.”
Given the recent financial struggles across the industry and the delisting of companies like Shapeways and Fathom, it is clear that AM companies face a challenging environment. Desktop Metal received a non-compliance notice from the New York Stock Exchange (NYSE) in November 2023, stating it did not meet the continued listing standards as its stock price averaged below $1 over 30 consecutive trading days. To address this issue and avoid delisting, Desktop Metal implemented several measures.
- Desktop Metal announced a reverse stock split effective June 11, 2024, to raise the stock price to meet the NYSE’s minimum bid requirement.
- In Q2, Desktop Metal continued its cost reduction plan while adjusting its business structure to align with the current 3D printing market. The company introduced the new PureSinter furnace for single-step debinding and sintering of high-purity metal parts, with the first unit sold to AmPd Labs in Texas.
- Desktop Metal announced that leading Italian metal science company Legor validated platinum on the DM Production System binder jetting 3D printing platform.
- At the 2024 RAPID + TCT event, Desktop Metal showcased over 24 customer applications and breakthroughs in metal and ceramic 3D printing production, including collaborations with global high-end architectural lighting leader Bega and intelligent power management company Eaton.
- Wisconsin-based Evology Manufacturing installed its fourth Figur G-15 digital sheet forming system, a full-service contract manufacturer registered with ITAR.
- Desktop Health announced that its proprietary Flexcera Smile Ultra+ dental resin is now validated for 3D printing high-strength, lifelike dental restorations, suitable for implantology.
Financially, the company reported a gross margin of -83%, impacted by one-time non-cash charges. However, the adjusted gross margin was 29.2%. The company's cash, cash equivalents, and short-term investments stood at $46.7 million, with an improved operating cash consumption rate compared to the previous year.
As it prepares to be acquired by Nano Dimension, Desktop Metal announced it would no longer provide financial guidance for the remainder of 2024. This decision allows the company to focus on addressing financial challenges and stabilizing operations during the merger. By not issuing short-term financial expectations, Desktop Metal can concentrate on long-term improvements. The merger announcement marks a pivotal development for Desktop Metal. As Ric Fulop emphasized, this merger will create a "true leader" in the AM sector.
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