Q4 2020 Desktop Metal Inc Earnings Call
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Greetings and welcome to desktop metals.
The fourth quarter and full year 2020 financial results conference.
At this time all participants are in a listen only mode.
The question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder of this conference is being recorded.
I would now like to turn the conference over to your host Mr. Arjun Arguable Chief product officer. Thank you Sir Please go ahead.
Thank you and thanks to everyone for joining us today for desktop metals fourth quarter and full year 2020 earnings conference call.
With me on the call are Rick.
The CEO chairman and co founder of desktop metal and James Kelly CFO of desktop metal.
Earlier today, we issued a press release and made a slide presentation available on our Investor Relations website, which provides an overview of our business and financial highlights for the fourth quarter and full year 2000.
Full of this call is being webcast live on desktop metals Investor Relations website, and the webcast and the accompanying slides will be available for replay for 12 months. Following this call.
The content of today's call is the property of desktop metal it can't be reproduced or transcribed without our prior written consent.
Before we begin I would like to refer you to slide two of our presentation, which contains our safe Harbor disclaimer.
Today's call will include forward looking statements. These forward looking statements reflect desktop metals views and expectations only as of today March 15, 2021 and actual results.
<unk> may vary materially based on a number of risks and uncertainties for more information about the risk factors that may impact desktop metals business and financial results. Please refer to the risk factors section of the annual report on form 10-K that we filed with the SEC. In addition to the company's prior filings with the SEC.
We assume.
No obligation to update the forward looking statements.
Additionally, during this presentation or the following Q&A session, we may refer to non-GAAP measures, including EBITDA and adjusted EBITDA.
These measures are intended to supplement but not substitute per performance measures calculated in accordance with GAAP.
Our earnings release contains.
The financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures.
With that I'd like to turn it over to Rick.
Thank you art and.
Good day, everyone. We're excited to welcome you to our first earnings call as a public company.
The past several months has.
It has been transformational for desktop metal.
In the fourth quarter alone, we completed the transaction between trine and desktop metal.
Started trading on the New York Stock Exchange and began shipping several new products corridor of long term road map.
Many of the year with over $595 million from the balance sheet to fund our growth strategy.
I'd like to start today by providing an.
In overview of our business for those that are new to our story.
Highlights some of the key milestones, we achieved in the fourth quarter and.
And discuss some of our strategy going forward.
After my remarks, James will cover our evolution to a public company.
Our financial results for the fourth quarter and full year 2020, and provide guidance for 2021.
First an overview of our business starting with our investment highlights on slide three.
Desktop metal is the only pure play additive manufacturing coupon of our company.
We're pioneering a new generation of additive manufacturing technologies focused on the production of end use parts to help businesses make high performance products faster.
Sustainably in our cost of volume competitive with conventional manufacturing processes.
The other manufacturing market is the significant and growing opportunity that's expected to go from roughly $12 billion in 2019 to about $146 billion by 2030.
This 11 ex growth is being propelled by a shift from prototyping and tooling into.
Into mass production applications.
And the industry has strong secular tailwind the IRA.
Round onshoring of supply chain flexibility.
We have a growing portfolio of additive manufacturing to point out solutions focused on volume production of engines parts that we think has industry, leading price performance and capabilities across the portfolio with over 190 <unk> materials qualified across.
Morris metals, ceramics, composites and Biocompatible resins.
Our products include some of the largest and fastest D. L. P systems in the market with the ambition of one HD and the extreme 8-K.
We've got the fastest metal printer in the market with the production system P 50.
It's about 100 times faster than prior generation of technologies like laser powder bed fusion.
Parliament of also got a series of developing businesses in composites and bought higher vacation that we're going to expand.
As I'll discuss shortly.
This portfolio is backed by differentiated technology moats.
That includes printers software materials and over 260 patents issued or pending.
We are of a second major moat around distribution.
We now have over 250 partners in 68 countries around the world.
We're doubling down on a combination of horizontal and vertical focus for the channel to go after a variety of markets.
We've got a solid dental and jewelry business and will continue to expand our focus into verticals such as health care automotive.
In the aerospace and oil and gas.
Got a very compelling financial profile of the products I highlighted earlier.
Each of high margin recurring revenue streams from consumables and service, which generate a multiple of the upfront revenue and gross profit over the lifetime of the system.
All of the Hall, we anticipate significant gross margin improvements and operating leverage.
Total revenue over time.
And finally, we believe there's a significant inorganic outside potential in the business and we've got a team with experienced execute interest actions we've.
Ended the year with a very robust liquidity profile and we expect the uses to fund organic activities, but also generate a return as we add strategic capabilities to the business in.
The line with the strategy focused on enabling killer apps for additive.
Taking a step back to look at the additive manufacturing industry as a whole on slide four today.
The percentage of the spending of program goes to the design prototypes tooling jigs and fixtures.
These use cases has traditionally been out of the focus of additive manufacturing.
As we said is actually used to be an industry called rapid prototyping.
But the vast majority of the spending in our program.
Really goes to the end use parts in production.
Turning to slide five.
If you take out of manufacturing or a M to mass production.
There's four key hurdles.
Each of the high bar given the maturity.
Factoring from Edinburgh manufacturing processes and the.
Polymer space for example surface finish of traditionally being a barrier having.
Moving parts of that look and feel like Indias parts for the Palmer I am has cleared this hurdle, but for a long time the.
<unk> didn't have the required accuracy do they they're of resins available that fully cure during printing.
So you can achieve the finish and accuracy.
Judy of can we go to market with an parts.
Zero properties is also of recent area of innovation with multi care of resins, which now enables making parts from materials that rival or exceed widely available thermoplastics and finally speeds have gradually been increasing since about 2011, primarily through continuous printing, which we patented.
And they are now.
So you need at the point, where you can use photopolymer am production and kind.
Volumes.
The story is very similar on the metal side, where overtime technology advances of cleared each of these bars the.
He hurdle we had the M are now addressing the.
The speed and cost where throughput has historically limited the use of metal am.
Richie parts and systems have not been cost effective.
Turning to slide six.
We're focused on print processes with productivity of that continues to improve over time, writing semiconductor scaling laws.
In metals.
Got the fastest binder jetting systems in the market the engine that drives the throughput as inkjet.
Because I went through put every roughly 18 to 24 months for the past 20 years by improving the muscle density in droplet firing frequency.
Whereas the vector based sprint processes, typically require more time or more cost of scale throughput.
An area wide process of the gains of efficiencies over time like our proprietary single pass jetting technology drives the economics of additive.
Which is down the cost curve to make it competitive with conventional the manufacturing of volumes up to hundreds of thousands of units per day.
And even larger volume because of new generation of print engine is introduced.
On slide seven we see the same thing happening for the partners with the move to UV diodes as the light source of procuring.
Conversion takes a lot of polymer printers have.
Of scaled speed roughly every 24 months of new generations of diodes come out.
Now you've got their new patented approach called projection of rates.
Which multiplies improvements in power output enabled sprint speeds to scale, even faster Reza.
The resolution has also had scaling with rapid advancements in underlying.
The image projection technology ease of.
Allows you to have larger bill platforms with more parts.
The result of all of this is that our photo polymer printers can now use these improvements in power and resolution to shift further the cost curve, making at scale of printing.
Of Indias Palmer of parts viable.
With this focus.
Is that right third party improvements inefficiency empower we have the wind behind ourselves and we anticipate growing more competitive with conventional manufacturing each year.
Turning to slide eight.
Other manufacturing coupon of all or a MTO pointed out of Representatives next generation of technologies that enable.
The technology and production of end use parts with finish accuracy properties and economics that are actually competitive with conventional manufacturing. The end market has compounded at 20 per cent annually over the last decade to $12 billion by 2019.
The last three years before 2019, it actually compounded at 25 per cent annually.
So I think the market overall exhibited a strong bounce back from COVID-19 in the fourth quarter that points to a promising year ahead and.
And the industry is expected to continue the compounded at roughly 25% over the next decade to get to $146 billion by 2030. This inflection is really being driven by more and more business is shifting towards.
We can use parts powered by aimed to point out.
And that $146 billion only represents 1% penetration of the overall 12 trillion dollars.
Global manufacturing industry. So there's plenty of room to continue to grow.
Turning to slide nine the reasons. So many businesses are looking to use additive for end use parts as.
The words and eliminates the need for tooling, which has created significant pain points in conventional manufacturing for example, long lead times minimum volume requirements time sensitive machine programming and significant material waste.
Commercial manufacturing also creates design limitations that can negatively impact performance in cost in favor.
They didn't durability.
Additive enables benefits like the ability to design complex parts using generative design tools, the optimized for real World Physics, or assembly consolidation, which takes many components in prince of them as a single part with dramatic efficiencies on weight or performance.
Our mass customization of parts to particular markets or.
Matter of fact.
We're finally reengineering supply chains around the on demand flexible manufacturing capacity in digital inventories where business of ship files across borders for local manufacturing.
Theres, a dramatic opportunity to reshape the global commerce and improves the O two footprints as we develop more efficient ways to mass produce and ship products to consumer.
Environments and these are key long term tailwind for am to point out.
I'd like to spend some time to highlight some exciting initial applications that are becoming cost effective with our aim to point out solutions.
In the past, you've probably heard of out of being used for very high end very low volume parts like jet engine components.
I think one of the problems of additive is it cost from patch to be used at scale in larger markets.
One of the more exciting things about our solutions is that we can now use aimed to point out technologies to make hundreds of thousands of parts and application that you never would have considered using additive for in the past the <unk>.
Slide 10, you can see one of our.
Consumer is for example, a company called EAC in France, there of major supplier of metal accessories for swimwear cosmetics and luxury goods for companies such as Chanel and movie time.
More and more of their using our shop system to mass produce pieces. They can end up in the stores that U S. The consumer I could go to and purchase.
That is a fantastic fantastic development.
Cost of the receive their system middle of last quarter, and it's already making parts in high volume the.
The shop system helped the EAC increaser of leather hardware production from 10000 pieces per week to more than 70000 parts per week.
Those of real manufacturing numbers.
Tens of thousands of pieces per week shop system also.
For added something to create volume quantities of these accessories, which significantly reduce lead times, which is important in the fashion industry and minimal to no manual assembly required.
This is a game changer for an SMB business like this the supply and end use parts to a market.
And it illustrates several core benefits of the shop system Binder jetting.
[noise] solution turnkey flexible manufacturing volume production of real end use parts with faster time to market and the ability to get up and running quickly with minimal prior of binder jetting experience.
That's the plug and play solution, it's extremely easy to install and deploy.
On slide 11, another exciting case.
So a lot of it is with one of our P. One customers free from technologies.
Got a very experienced team in Pennsylvania and are dedicating themselves to make the parts with metal of Binder jetting.
Of the P. One the part quality and throughput has enabled them to continually gain business with their customers.
Fulfilling small quantities of parts of it first and then grow into a large volume.
Case study because it's the digital manufacturing process that can economically turnaround thousands of parts and want the two weeks versus two to three months with conversion of all manufacturing or older generation AAM systems.
75 per cent.
To 90 per cent reduction in lead time.
On top of supporting direct material and process transfers to flagship.
From P 50, the pier one is a great tool for high speed serial production of small and complex parts.
Yeah.
Turning to slide 12.
As the fourth quarter, we also entered a fast growing photopolymer added market.
With our acquisition of ambition of deck.
The original inventor of digital light processing.
But I heard the L P printing.
An area wide for the polymer three D printing process you have significant blocking IP in the segment, which has bolstered our.
D M patent portfolio together, we create a one stop shop for am to point out of solutions across the polymers and metals.
What we're excited about with envision Tech you said their solutions have been used to produce.
And just parts of at scale with over 10 million parts in 2020 alone.
The market leader in fast growing segments, like dental where sales of their envision one platform growth over three ex in 2020, despite the challenges from COVID-19.
Ambition that gives us a fantastic platform as we expand the business.
Business the reach of whole new set of verticals and applications that benefit from all of our parts volume.
And on top of this we grew our channel in both number and geographic reach with great opportunity for cross selling metal in polymer solutions.
Looking at the product portfolios of Hall on Slide 13, we feel it's the most compelling of diverse set of aimed to point.
The solution to the market and it can cater to the metals composites of ceramics for the polymers and even include digital casting and bio printing capabilities.
And what's great is that it can address use cases across our product lifecycle from preproduction of all the way to volume end use parts.
This is the killer product lineup.
Almost all of these products.
Alex had been refreshed.
And released within the last year, and we believe they can take us to significant scale.
They are backed by a very strong IP portfolio of over 260 issued and pending patents and supported by a library of over 190 of materials.
The build these products, we've really had to pioneer of set of disruptive technologies.
On Slide 14, now single pass Jetting is the patent pending technology that powers of production system platform. Unlike competitive binder jetting systems, which typically require of 20 to 30 seconds to print the layer. The production system P. One and P 50 can printer layer in under three seconds.
The equates to build speeds that are up to 100 times faster than <unk>.
Out of it.
Fusion is significantly faster than conventional of binder jetting.
The P 50 can support production of up to millions of parts of annually at costs that are competitive with conventional manufacturing at reasonable volumes.
And this is really key because businesses want adopt additive if it can't compete on cost.
The production system platform offers.
Geez only entered processing environment of the market. So we're actually able to print reactive materials, we of binder jet as an example, with great announcement last week on a breakthrough in the development of of aluminum for Binder jetting.
Where we've collaborated with our partners to achieve extremely promising results all of.
Over 99% density 60 61 of aluminum.
The properties better than rock with comparable heat treatment.
On the metal side. We've also got advanced metering technology was developed in house to be affordable and.
And easy to install.
It makes binder jetting and accessible turnkey solution that can be adopted rapidly by businesses and individuals without experience with print.
Terry allergic both of these technologies are enabled by life Center, a proprietary centering simulation of software designed to improve part accuracy and eliminate the trial and error for powder metallurgy based out of the manufacturing dynamically stimulates the centering step of the binder jetting process to predict shrinkage in the distortion and correct geometries before printing to minimize any deviations.
Our metal in the design of the final part.
The softer two will be a key enabler for brought up the option of binder jetting.
Turning to slide 15.
On the Photopolymer side, we have a unique patented technology and continuous digital light manufacturing.
As an extremely cost effective solution for mass production of photopolymer parts that use of proprietary.
Briatore read the almost basement technology to provide higher accuracy of prints and membrane alternatives.
The ambition of one H D, which began shipping in the first quarter of 'twenty 'twenty. One is the only commercially available high temperature high viscosity of Photopolymer system.
Shipping in volume today.
And we think this is.
The future in Photopolymer am this technology allows businesses to achieve properties on par or exceeding the conventional and thermal plastics.
And these systems are doing extremely well.
On the right here is the new extreme aid case solution, which uses patented protection of rate technology to achieve native 8-K resolution ineffective.
The effect of 16 K resolution of at very high speeds.
It's the most of advanced polymer and system in the market compared to on the industrial photos for 50 F. D. M printer from Stratasys the systems up to 100 times faster with the build envelope that's roughly the same size.
And it offers superior price performance to comparable industrial Palmer.
All of our aim systems.
And just like the ambition of one H. The it supports high temperature high viscosity of restaurants to enable a wide variety of industrial commercial applications.
Yeah.
Digging into our go to market on Slide 16, we've got a leading global distribution network today with over 200 partners.
Can sell.
In service of our solutions in over 60 countries around the world our.
Our partners address a wide variety of markets and include vertically focused players as well as the ones focused on general industrial businesses.
They can support a variety of business models and product offerings, whether it's low touch high volume of high touch high value.
We think this is one of the differentiation.
She adding assets of the M. As a company and we believe this will be a key factor in accelerating our growth to achieve global scale and launch new products efficiently.
Turning to slide 17.
We've got a very broad adoption of our aimed to point of technologies across the variety of industries in both polymers and metals health care automotive.
Aerospace oil and gas and consumer products diversified manufacturers and machine shops.
We're excited to expand this user base.
Two more blue chip customers and Smes, because we continue to ramp production and distribution of our newer solutions.
Turning to slide 18, the unit economics of these products are fantastic.
The two examples.
Here are the production system be 50 of the extreme okay.
The the lifetime revenue and gross profit of each system is the multiple of the initial sale off.
The three ex to six and a half million dollars in the case of of P 50, and the upwards of 10 ex to one and a half million dollars with the extreme Aitken recurring contribution comes from the sale of high margin consumable.
The levels and services, which resulted in strong gross margin profiles over the life of the system.
So they really demonstrate a pretty attractive razor razorblade model, where the initial sell generates a profit as well.
Turning for a moment to our strategy related to inorganic growth on slide 19.
There's an opportunity here as we continue to build out of strong distribute.
Distribution channel to bring new technologies from the printer side, they're focused on any of them to point out.
There's a lot of innovation in the private sector, and we look forward to adding new print capabilities to our company to enable a wider set of obligations and use cases.
The second vector for inorganic growth as materials, where we see a huge opportunity to benefit from vertical integration.
We've already built vertically integrated structure for materials and the photopolymer side, where we also have an open certified materials business model to work with partners with unique materials outside of our moat to offer validated third party solutions to customers on.
One of the metal side vertically integrating into advanced materials difficult for conventional manufacturing could I. Please the lifetime value of that.
P 50 customer, perhaps two to six ex.
The third vector for inorganic growth is building a strong parts offering around the killer apps for added where our focus is to incorporate business. That's in the segments with high margin high barriers to entry.
And you'll see more about our strategy in this area of say your progresses and we execute some of these transactions.
We believe this can be.
Very accretive to the company and provide a strong return on capital.
In the case of emission thick.
No.
There are already several markets, which have been quick to adopt a M at scale and we're going to focus on building go to market strategies are about each of the segments hearing AIDS for example.
He is an application that has almost fully crossed over.
Into additive.
The same goes for jewelry, where and if he was widely for creating lost wax malls for casting.
And now it's starting to be used for direct metal printing.
Turning to slide 20.
Today, we are announcing the creation of a new business called desktop health focused on patient specific additive manufacturing solutions for the health care and dental markets.
To help lead this initiative, we're bringing on board, Mike Jafar, who had a storied career at a bolus of Allergan launching some of the best known brands in the health care space.
We feel there are commercial ready applications in dental orthopedics audiology and surgical instruments.
But theres also a lot of exciting potential in all of the untapped.
Top categories, and we look forward to working with Mike and his team to develop solutions for these applications and bring them to the market using our D. L. P high speed metal binder, jetting and buy a plot of solutions.
Our vision here is.
Is that today, you've got more than $85 billion of medical implants annually and the.
Most of the produce.
The standard manufactured sizes.
We think that's going to change over the next decade, or two where most of these parts will be kind of patient specific and that's a major opportunity for out of manufacturing across metals polymers ceramics in all the materials.
On slide 21, net those one of the killer apps for out of manufacturing. It's a segment that has been patient specific.
Perfect for some time now since every party of custom.
It's a market that is both growing and adopting out of quite rapidly.
However, with more than 30 billion of annual parts of the spend in dental.
Of the a small percentage of that total is printed.
Most of central parts of the they are still mailed or made by hand in the lab.
We see an excellent opportunity for out of the reach of up to 75 per cent by 2025, and we plan to be of major enabler of aim of adoption in the ortho lab insurers have dental markets.
Materials are key to enabling applications in this market you can see how many different use cases for am there are in polymers metals ceramics, we've got several material.
Serials that of either received FDA five 10-K clearance of our in process, including proprietary materials for permanent crowds and full of large implant ventures with industry leading performance.
Turning on to slide 22.
We believe the future is still have processes that take less time, where you can remove the temporary setups.
An example is full.
Joint ventures, which is a procedure that do they it takes on average three weeks from beginning to end.
Enabled by our breakthrough proprietary materials and combined with our high speed printers, we developed with our partners of Revolutionary same day of digital workflow for full arch joint ventures. These new three D printed smile takes place in the single day and the comfort of of IV sedation and this will be one of several initial solutions.
It will bring to market with desktop health.
Our materials and process had been tested in a clinical study conducted in coordination with leading partners in the field and participation from roughly 900 patients since March 2000, and since then there'd been no failures were printed implant ventures and the results overall have been excellent this application.
<unk> is part of roughly $4 billion of dental implant market, where we feel.
There's potential to completely revolutionize how patients are treated.
This is all enabled by a combination of advanced materials in both metals and polymers.
Would really high quality properties and AMT technology is suitable for end use part production we.
So with the building a best in class team in health care and dental to work with our partners in industry to bring patient specific solutions to the market of scale no.
Just in dental, but also across cardiology, orthopedics, ophthalmology, dermatology and plastic surgery.
Now turning to our fourth quarter business highlights on slide 24, as I mentioned.
And earlier, we made several key strides in the fourth quarter towards commercializing our aim to point out the technology platform.
We started global shipments of of shop system.
Mass market Binder, jetting solution for Smes and machine shops.
It's the full turnkey offering designed for flexible mid volume production.
Just on published figures.
In just one quarter in the market shop system became the number one selling binder jet system in terms of the units.
In addition, we'll be going global shipments of our production system P. One solution.
The entry level model for our production system platform.
It's also of Great proof point on our path to commercializing the production system be 15 of the second half of 2021.
At the show the same technology architecture and corporate modules.
We're incredibly proud of our dedicated team of employees that helped us achieve these key product launches in spite of of the challenges and disruptions created by COVID-19 during 'twenty 'twenty.
Among our commercialization of products, we gain adoption from key customers such as Milwaukee tool Ford eating patent.
Sure.
Yeah.
We also launch of our central simulation software life Center freezing of Binder Jetting solutions and received significant awards from the department of Defense.
We'd be stop of our board of directors with the addition of Scott the so as the bedroom and CFO and Steve Nigro, he used to be president of Hps printing and imaging business.
With that turn.
Whitney Andrew James Who's going to discuss financial highlights James.
Thanks, Rick and thanks, again to everyone for joining us today.
I'm James Haley the CFO of desktop metal.
I am pleased for this opportunity to share of desktop metals financial results for the first time as the public company.
Begin with the quake.
Wake recap for those new to desktop metal both of them.
All of it providing a summary of the company's fourth quarter and full year results for 2020, and closing with guidance for 2020 one.
Which can be found on slide 25.
We announced a definitive business combination agreement with Triad acquisition Corp on August.
August 26, 2020 concurrently with a successful pipe fund raise that in aggregate provided approximately $530 million net proceeds to our balance sheet.
The business combination was completed on December 9th and we began trading on the NYSE on the.
Under the ticker symbol of the.
Moving to our financial results for the fourth quarter and full year of 2020.
We are pleased with our fourth quarter results, which reflected an inflection point in our business as we successfully commenced shipments of several new products.
We generated revenue of $8 $4 million for the fourth quarter of 2020 up from $2 $5 million in the third quarter and in line with our expectation of sequential acceleration.
Cost of sales in the fourth quarter was $10 million, resulting in growth gross margin.
Of negative of 20%.
This represents a sharp improvement from the third quarter of 2020, as we began to scale revenue out of our fixed.
Overhead costs as well as a shift towards higher margin products.
Net loss for the fourth quarter was $25 $4 million.
Which includes increased G&A expenses related to our transaction with trine and becoming a public company, including additional head count for our corporate functions.
Legal and professional services and insurance.
Looking at the year overall revenue for fiscal 2020 was 16.
$1 $5 million.
Net loss and non-GAAP adjusted EBITDA.
For the fiscal year.
We're negative $94 million of negative 70 of three $5 million respectively.
We ended the year with a well capitalized balance.
Non sheet, including cash cash equivalents and short term investments of $595 $4 million as of December 31, 2020.
On February 26.
2021 with more than 75 per cent of the public warrants from the transaction were trying already ex exercise.
First we announced the redemption of the remaining outstanding public warrants.
Through March 10, 2021, 11, 9 million public warrants were exercised for cash, resulting in proceeds of $136 $8 million.
Yeah.
Looking ahead to 2021 with our robust capital position, we plan to hit the accelerator on growth.
<unk> to make substantial investments in both organic and inorganic opportunities over.
Over the past few months, we have significantly expanded our sales in March.
Getting engineering and administrative teams to ensure we are well positioned to fast track of organic growth.
Further we are building out internal M&A capabilities to support the multiple in organic growth initiatives, which Rick spoke to earlier.
For the full year 2021, we expect to generate revenue in excess of $100 million, including contribution from envision Tech.
We plan to exit the year with an annualized revenue run rate of at least the $160 million.
With multiple product launches from the.
Fourth quarter right in the rear view mirror and the additional commercial launches this year with envision Tech extreme 8-K, and envision one H T. In the first half and the production system <unk> 50 in the second half, we anticipate sequential growth to be relatively modest in the first quarter followed.
The more substantial acceleration beginning in the second quarter as various growth initiatives take effect following COVID-19 and as these new solutions picked up steam.
Turning to adjusted EBITDA on a non-GAAP basis, we expect this to be in the range of negative $50 million to $60 million.
Of the buyer as we continue to invest in organic and inorganic growth with that I'll turn the call over to Rick Rick.
Thank you James we're excited to be engaging with our new public shareholders as we embark on this journey, we're building our business for the long term and our leadership team and board are aligned with our public.
Bruce will bureau of Am to point of our platform is the leading the way and empowering businesses to finally realize the promise of area of manufacturing.
Re engineering supply chain localized production full design freedom.
All at a competitive volume of cost.
Increasingly digital manufacturing landscape is going to experience.
Sure hold the massive transformation over the next decade and we.
Desktop metal are thrilled to be at the forefront of of this fourth industrial Revolution.
That will conclude our prepared remarks. Thank you everyone for listening and for your support James and I are now happy to take questions.
Thank you ladies and gentlemen, the floor is now open for questions.
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Our first question is coming from Shannon Cross of Cross Research. Please go ahead.
Good morning, I was wondering Rick you know looking back at the last I guess, we're at seven or eight months now since you announced the the transaction and guidance at that point, which I.
With a $15 million to $25 million in revenue for 2020 can you talk a bit about what headwinds you faced.
What you're seeing from them the market in terms of receptions of some of the launches and just you know well, it's leading you to be a bit more cautious in first quarter or what the unexpected ramp.
Thereafter, thank you.
Hey, Shannon. Thank you part of the question I think we we have great a funnel of this building for our products, we didn't get to the ship are our shop system until probably middle of or second.
Second half of the fourth quarter and our you know the.
Critical COVID-19.
Supply chain related things so of moving things around the world, but we did we did of global launch in all continents, which I think was the strategic thing for us to.
Get going on our own of shop system in.
We.
We did that to prevent a the.
Potential limitations of different places that we didn't know whether they'd be locked down or not the overall, we're pretty happy with the results are given all of the all of the traditional challenges that other companies faced the to get the products deliver around the.
And.
I think that as we come out of the pandemic, we're going to see some great resurgence and people going back to two of their labs and manufacturing spaces to execute.
Execute programs so.
But I guess I I appreciate that I'm, just trying to figure out of it maybe we think about first quarter.
And the ramp through the year, you know what what sort of builds upon itself that shows the acceleration starting in second quarter and you know what are the sort of the key products, we need to to watch.
Yeah, I think it's a reflection of our of our file it how it's building right now we've got a number of of exciting products, particularly.
The the ambition of one HD Univision one system continues to pick up a where we're pretty happy of the waste to just continue to develop the studio two is now starting to ship and the shop system continued acceleration of that in and.
Once as well so it is the product that we've been describing I.
Think of as we go through.
The the rest of the year.
We will have a progression that's similar to what you see in our industry, which is.
You know Q2, and Q4 are probably the the landmark quarters in an additive and then Q1 is usually.
Our refresh from.
At the beginning of the year. So that that's just a reflection of of how we feel the year's going to progress based on the funnel and how things are coming along.
I guess no one.
I would add on that too is we are planning to launch in vision, one H T. The extreme a K a.
You know, we're seeing strong demand for those already and certainly we have the P 50 system that it'll be coming out in the second half. So the pipeline is really developing from here I mean, Rick touched on the headwinds for Q1, but what we see now are we're very optimistic about the the.
During the year.
Okay. That's that's helpful. And then maybe if you can just talk a bit about from an expense perspective, where where you're funneling some of the incremental dollars. How much of this is because of the envision Tech you know how much you talked about expanding your your sales and marketing team of.
And and then maybe how much of this is.
The remainder related to your new health care initiatives. Thank you.
Sure Great Great question, I mean, certainly as I say.
<unk> in her prepared remarks.
We're sitting on nearly $600 million of dry powder really where we're trying to hit the accelerator on growth here and that's going to be achieved certainly.
With with multiple organic and inorganic opportunities.
We touched on we're building out an internal M&A capability, certainly our organic sales team the envision tech sales team marketing.
Continued efforts on research and development looking at the various cost down initiatives as well as future products.
And then all of the integration of multiple opportunities. We're looking at Oh, I will add to the certainly the public company expenses were not were not something that was sort of contemplated in some of the numbers. Prior of those numbers are certainly of substantial and when you look at our market cap in particular insurance.
And various professional fees registration fees there there certainly are substantial.
Great. Thank you.
Thank you. Our next question is coming from Greg Palm of Craig Hallum. Please go ahead.
Yes, thanks, good morning.
And that's in all of the achievements, thus far I guess, maybe just kind of starting at the at a high level and I'm really looking at the port product portfolio of specific to desktop but.
Help us understand you know raking in order of importance studio versus shop versus production.
Congrats on I'm, just kind of curious if you think about timing for P 50, and the launch is that something that we should expect some revenue contribution this year or is that more of the fiscal 'twenty two event.
No definitely we will expect some contribution of <unk> to this year in the second half and of that continuously.
Just to be on schedule all of PD, one and the shop system are important parts of our product portfolio of us. They are mass production of systems as well as our shop system.
Studio is a product that that has its niche.
And we're very excited about our studio too on the photo Palmer side.
Sure you envision one is very much of a hit product is doing extremely well in the market and in the particularly in dental labs and several of the segments.
Seem to see significant traction and adoption all of it is false or defer K per chair side and it's you know.
We think the Photoshop fantastic so.
We were planning to scale of extreme make gas of year goes on and are.
We're excited about that ramp.
Got it.
And just going back to the commentary on the Q1 of assumptions I guess I'm, just a little bit confused still so it sounds like you know in Q.
There were still some kind of COVID-19 related headwinds and maybe some push outs in terms of timing I guess looking at the revenue guide I thought maybe.
Maybe given some of those new product introductions, and obviously you've got contribution from envision that revenue would have jumped out of at least the guide the would've suggested a revenue jumped more sequentially I.
For the quantified what modest really means but is it just a matter of AR of timing and seasonality.
Yes, you nailed it on the head certainly Q1 is traditionally a challenging quarter for the entire industry certainly we experienced the those challenges as well we do have some of the Covid channel.
Yes, you have just going on as well, but really as we are heading into Q2, we're feeling very very good about our Q2.
Okay understood and then last one you know there were some M&A rumors floating around the this last week I I don't expect you to address those reported specifically, but you know given that you've just.
<unk> completed the acquisition of envision attack.
You know in terms of inorganic kind of how active you are you expect it to be in the marketplace in terms of additional M&A.
I mean, we've kind of strategy, we laid out earlier.
<unk>.
During our original road show and in the just reiterated we plan to continue.
Continue to be active in M&A. However, it is a it's something that with the selectively we acquire things that give us new capabilities in any of the.
The print modalities for am to porno or vertically integrating tor into materials of consumables at our systems use.
The particular in high.
High volume production applications, and then on the parts side, we've got a strategy to enabling the printing of difficult to manufacture <unk> materials.
The which requires specialized processing as well as killer apps, where there's significant IP are of high margin.
Markets and so we're going to continue to execute.
He did that and you'd see transactions in the future of suite that's that goes on.
I'd say, we looked at a lot of a lot of business opportunities. It's it's not uncommon for a company that just went through what we went through two to see a lot of things and so we're very selective in.
And what we are.
Absolutely.
The forward with but the where.
We're excited about the.
Of the things that we've kind of front of us and think we can.
Do very accretive.
Actions.
Understood Alright, I appreciate the color. Thanks. Thank.
Thank you.
Once again, ladies and gentlemen.
If he would like to register a question you may do so by pressing star one on your telephone keypad at this time.
Our next question is coming from Josh Sullivan of the Benchmark company. Please go ahead.
Hey, good morning, Nic James surgeon.
Congrats on the first of all of the corner here.
Thank.
First of.
On the launch of the desktop healthier how should we think of this vertical in the portfolio. You know it was going to of a dedicated sales force what what's the go to market strategy here.
And then maybe what are you what are the two or three primary products, we should be focusing on over the next year or so.
Absolutely so that the health of our opportunity is massive today most.
Parts of it are used in health care are not patient specific with the exception of dentistry, where the truth of the made by hand part of pace.
So when you are.
By a graft or an implant it's traditionally something that was.
Was producing four of five or 10 sizes and then the surgeons trying to match it at the time of.
The.
Time of surgery, and I think that a decade or two from now everything will be patient specific and based on everything probably with the exception of trauma, which needs a real time inventory.
But.
I think that Ah that per center, a very unique opportunity to develop.
The core competency in the business and we are building a world class a go to market team, that's going to develop clear products as.
As well as help our partners are in the health care industry adopt.
The optic technology at scale.
We.
Are going to be very creative in the and the types of products that we're gonna help our partners bring to market and I'm.
I'm excited too.
The share of those assets.
We of all of it but I think it's gonna be a very vibrant part of our business I expect it to the.
We are at least the third of our business in the long run so it's.
It's the great area, where the.
Indias parts can do very well and I think you'll see the the health care industry adopt additive the.
At scale over the next decade.
Okay.
Yeah.
Thanks, and then maybe just one on the on the production system you know with the launch of of the PD. One can you just talk about how that's led to additional pipeline development for the P. 50, just curious out of those two systems of working together and then maybe just what does like the what does the the the pipeline of the P. 50 look like at this point.
It continues to grow I think we have a great.
Synergy between our people one of your 50, most customers that buy of P. One in the long or want to have a P. 50, that's sort of an on ramp to that platform. He was actually developed in concert with a major customer who bought up the 50, but need of P. One type.
Machine in order to qualify materials and parts without having to get a P 50 like machine sort of.
Pooled from production in order to do of qualification of our components. So if you're if you go to mass produce if you're a large company of got 10.
10000 of Skus.
5000, skus that you'd want of print.
The platform to qualify those while you've got the large capex printing 24, seven and that that's how we see the synergy between those two architectures settings or qualification that you're doing a P. One translate 100% two of the 50 they have the same modules and the same.
You need of inkjet systems are the same.
Re coding process. So it's a it's a I want to one and we validated that with some of our customers that have both.
The installed there a beta of of P 50 in the in and have received the P. One and I think that the.
The obviously of P. P. One is of much smaller machine, so it's easier to install and deploy a but it it's a great platform, it's going to help us mature the technology to the point, where you've got high O E. By the time, we deploy the P 50.
And to the market later this year. So we're excited about about how those two systems of play together.
Got it.
And then just with regard to the admission Tech acquisition subsequent acquisitions, you guys might do here.
How do we think about the one of the long term targets I understand you don't want update us every quarter, but you've got a lot of dry powder here to execute additional M&A, how should we think of the those long term targets maybe versus some of these inorganic.
Organic opportunities you're pursuing I.
I think there I mean, obviously you'd have to update.
After the models when we do transactions some of the companies, we're going to acquire or more technically oriented and so theres sort of capabilities of the technology that would allow us to have the future products and some of them are.
The company's.
That have some scale of like envision tech and in an installed base that we're then going to provide additional distribution or.
Help.
The scale faster, so I think that that debt.
It depends on the on the transaction.
And we have several things that we're working on so we as we.
To execute them wed love to yeah.
Explain the opportunity in and why we did what we did and then I think there's a oh.
A great opportunity in in bringing aimed to point out technologies to the market one one thing that.
I think as.
The focus of US is we're not going to do any acquisitions on.
Sort of tooling or jigs and fixtures are the things that we would consider am one O R.
Our our market grew and instead.
And sort of of rapid prototyping.
Tooling type of World and.
And our company is 100% focused on mass production of end use parts. So there's all of the folks that would like to.
The claim that there is that it's the same thing, but there's sort of two ways of playing this market.
One is to take the technology that's off patent for example, like F T M.
And develop a more modern version of that.
For the smaller markets like total and jigs and fixtures and the other one is to.
Really tackle the the issue of how do you go to mass production of scale with with additive and we're 100 per cent focus on what we call a M to point out which is the production of additive parts of the scale.
Out of lower cost structure than conventional amount of factoring and where the.
<unk> are the driver so that.
That's 100 per cent the focus of the company and all of our M&A strategies and and the execution. Our focus is geared towards making additive cost effective the system.
Scale too much today to bring to market and an older technologies, just not cost effective on a cost per port basis. So the focus of the companies of 100% on the combination of techniques that give you a combination of surface finish accuracy material properties and throughput. So you.
Cost actually go to market with a.
Three D printing.
The the one point I would add is the first part of your question and that is the long term thesis is intact and we are doing everything we can sort of accelerate it responsibly. The highlight <unk> points I mean, we're in the business of acquiring long term technology that's.
It's really going to help us not short term revenue and accretion so hum.
Hopefully later this year, we'll be in a position to provide some updates on the longer term model, but as we sit here exiting Q1.
We don't think it's the right time to do it.
Got it okay. Appreciate the time.
Thank you.
Thank you. Our next question is coming from Noelle Dilts of Stifel. Please go ahead.
Yeah.
Hey, guys. Thanks for taking my question. So this kind of ties into the last question.
But I'm just trying to reconcile.
The 2020.
One EBITDA guidance Swift.
The guidance you were talking about at the time of the this back.
And so I'm just trying to understand sort of as you look at that bridge how much of that is coming from envision tack of versus the kind of continued headwinds associated with COVID-19 as we look from I think.
Coming from around <unk>.
Roughly $31 million loss, including some of the public company costs versus the guidance you provided today could you help me just understand how to think about that.
Sure. So certainly the public company costs as I mentioned of our are substantially higher than I think what we yes. The first.
Beyond that I really view it as additional investment in the business I mean really as I stated book with near of $600 million of dry powder, we could essentially just go the status quo in the and leave the funds in the bank, earning near near zero interest, but instead, we're doing everything we.
The accelerated some of those those longer term financial targets.
That is how I would be thinking about it in terms of envision tax no of that is not really of a drain on EBITDA. If you will.
You know it is the transaction that you know as I mentioned, our primary focus towards it.
Cairns, who acquired good technology with envision Tech, we certainly got that we did also get some good stable revenues and a healthy bottom line as well so.
Really its more about accelerating the growth story.
Okay. Okay, I just wanted to make sure I understood that.
And then.
Especially at the time of day, if there's any tech acquisition, you talked a lot about the growth profile and how you're thinking about contribution but maybe.
If you could speak to just you know of.
You've kind of.
Worked worked more of what the company in any sort of indication if theres any change in how you're thinking about.
The growth over say the next five years.
And then.
Kind of related to the last question.
I understand you kind of said Youre, maybe not at the point, where you could talk about the longer term business model button, but maybe going back to the EBITDA question, if you'd be comfortable kind of talking about generally when you're thinking about maybe hitting our breakeven point for a form of the profitability.
Sure. So as we think about contribution on the year and really we continue to integrate the businesses every day, we're really trying to sort of leverage different sales channels and and development strategies as we can as I think about revenue for the full year I would say roughly.
The per cent as we sit today is going to be on the organic the EM side with 40% would be in the vision that said going forward, it's not something that we really plan to talk about as these products are going to be fully and teams are going to be integrated the to really maximize our our sales if you will.
In terms of the longer term targets were not in a position to update those today other than to say there you know we're doing what we can to really pull the timelines and.
Yeah.
Okay. Thank you very much.
Yeah.
The six thank you.
Our next question is coming from Jim Ricchiuti of Needham <unk> Company. Please go ahead.
Alright, Thank you good morning.
A question on your Opex investments for 2020, one I'm wondering does that contemplate.
Expansion of your direct sales efforts I'm just wondering.
Wondering also in terms of of your partner network. The presentation references 200 partners and I'm wondering if you could provide any color on what percentage of that represents the envision pick and weather of mom.
Among the the 200 partners if there's much overlap.
The Rep partners representing growth T M.
M inhibition tech.
Yeah. So we went from about 90 partners to over 200 when we.
Debt or transaction and quite of vision Tech I'd say.
We have a significant continued expansion in our go to market strategy.
Yeah.
And there are significant synergies between.
The the channel that they have built in in our channel the very successful vertical integration into the vertical channels into into dental and and.
The jewelry.
Turning to leverage those as well as help envision Tech Ah.
Getting to the industrial markets, which is an area where they hadn't.
Participated us as much before so.
Hopefully that answers the question.
It it it helps and then just again looking at the investments you plan for 'twenty one of the on an opex.
Yeah.
And I may have missed it but I'm wondering if there's any flavor you could provide in terms of R&D versus sales.
Sales and marketing and enhancing the go to market.
Well I'd say that we have increased our investment in a variety of areas. Besides the R&D. We also have investments.
Once the applications engineering go to market related activities.
And the new product development.
Thanks, a lot.
Thank you at this time I'd like to turn the floor back over to management for any additional or closing comments.
Yeah.
I'm very excited.
Two to be talking to you all and and a look forward of connecting with you post this call. If anybody has additional questions. Thank you very much fear of support to date and we're excited to be bringing additive manufacturing solutions.
At scale.
To mass produce parts of volume in and the change the way people.
We'll make make products around the world.
Thank you and have a great day.
Ladies and gentlemen, thank you for your participation and interest in desktop metal you may disconnect. Your lines of log off the webcast at this time and have a wonderful day.
Okay.
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Okay.
Right.
Hum.
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