Q1 2021 Desktop Metal Inc Earnings Call
[music].
Greetings and welcome to desktop metals first quarter 2021 financial results conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
I'd now like to turn the conference over to your host Mr. Jay Ken's Kao Vice President Investor Relations. Please go ahead.
Thank you and thanks to everyone for joining this afternoon's call.
With me today are Rick <unk>, CEO, chairman and founder of desktop metal and James Haley CFO desktop metal.
Please note that our earnings press release and presentation slides referred to on this call are available under the events and presentations section of our Investor Relations website.
This call is also being webcast live at the same Investor Relations website, the webcast and 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 cannot be reproduced or transcribed without our prior consent.
Before we begin I'd like to refer you to slide two of the 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 may 17th 2021, and actual results 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 as amended in addition to the company's other 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 adjusted EBITDA and non-GAAP gross profit. These.
These measures are intended to supplement but not substitute for performance measures calculated in accordance with GAAP.
Our earnings release contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non-GAAP measures.
With that it's my pleasure to turn the call over to Rick <unk>, CEO and founder of desktop metal.
Thank you Jay.
Afternoon, and thank you for joining desktop metals first quarter 2021 earnings call.
I am very pleased with our progress since we last spoke with you, including our results were delivered on our first quarter of 2021.
Building desktop metal for the longer.
And some of the investments we've made over the past several months since coming public respect that thank you.
As we presented previously.
A list estimate the additive manufacturing market will scale from $12 billion at the end of 2000 $19 billion to $146 billion by 2030, we.
We have focused our business to capture what we believe is the biggest opportunity driving the growth of this market.
The volume production of engines parts from what we've defined as additive manufacturing throughput on all our A&P point on for short.
We're well positioned to execute on our strategic vision in AAM to point out and we expect to be a major player in this space. We define success by achieving a double digit share of the added market by the end of this decade.
And every strategic investment, we're making today has that go on mind.
I'd like to start today by reviewing our key accomplishments from the first quarter.
Before highlighting how our product portfolio and technology differentiate itself in the market.
And then go into details about some of the exciting recent developments of the business.
After my remarks, Geoff is going to cover our financial results for the first quarter.
I'll start on slide three with a quick review of our financial highlights.
We're very proud of the execution on the first quarter delivering revenue of $11 3 million and a sequential increase of 35% over the fourth quarter of 2020.
134% increase year over year.
Additionally, our margins continue to strengthen.
With first quarter 2021, adjusted gross profit up $3 3 million from prior year and.
On significantly after the fourth quarter of 2020 as well.
We expect continued margin expansion and plan to exit the year with greatly improved margins as we gain leverage over fixed costs.
Now, let's move into the business highlights for the quarter.
In Q1, we saw accelerated market adoption of our metals business with a variety of major customer additions.
We announced a key partnership to introduce 60 61 aluminum into binder jetting with better than rock properties, a major milestone for our company that opens up some exciting use cases and industries, such as automotive and consumer electronics.
Since we last spoke we expanded our materials library from 190 to 225 materials today.
Materials are a key enabler for engine part mass production and we have one of the broadest libraries on materials cutting across metals polymers continuous fiber composites ceramics, and now wouldn't last tumors as well.
This growing materials portfolio is 100% focused on end use part production.
Customer adoption also accelerated this quarter.
Gross various and to point out platforms.
We added more customers this quarter than all of last year combined.
We also closed the envision acquisition, which we remain very excited about envision Tek launched two new products in the quarter.
The extreme 8-K, and the ambition on HD, both of which are high temperature printing systems that represent significant growth opportunities for the industrial and mass production of polymer parts.
The extreme 8-K is the world's largest production grade DLP system.
The combination of high speed printing and vertical integration into materials enables superior price performance on both of those systems with compelling part economics for our customers.
Both the extreme 8-K on the ambition of on HD, our shipping and are in the early reception has been spectacular.
Another exciting development in the company is our launch of our process to mass produce with parts via added manufacturing.
<unk> is a new way to make high volume of end use printed with parts.
As our existing binder jetting platforms.
No new investments in hardware required essentially this is development of on new and unique material sets.
This capability was developed from a small acquisition, we made last year forest sustainably prints real wood parts and.
And products that can be used in a variety of industries from consumer goods furniture luxury interiors architecture and more.
We also saw strong continued momentum in the dental business, which grew 64% year over year.
We continue to believe this is one of the killer apps for AAM to point out.
Last week, we launched a new brand like Sarah from desktop helped targeted a dental prosthetic applications.
We're going to continue making significant investments in the health and dental segment, which is growing at a rapid clip.
Across not only polymers ceramics, but also on metals, where we are putting resources behind accelerating the clarification on materials, which can be used for abutments crowds partials among other dental applications.
We're also announcing today the acquisition of adaptive <unk>, which I will speak to in more detail later in the presentation.
This is a fantastic acquisition, giving us proprietary access to the world's best printed elastomers.
We believe printed elastomers or another killer app for additive manufacturing the technology started out as a military funded DARPA program.
That innovation has produced a new class of polymers that our principal and give you a market leading elastomer properties, enabling applications such as digital films through micro Architected designs.
We're super excited about the combination of adaptive <unk> materials with our portfolio of systems like the extreme 8-K.
Finally, we continue to build desktop metals team.
To best position the company with talent to execute our vision.
Have grown to over 470 employees today up from 180 this time last year.
Now, let's take a step back for a refresh of our strategy for desktop metal.
Turning to slide four today, only a small percentage of the spend in our program goes to design prototypes tooling and Jason fixtures.
The vast majority of the spending in our program goes to Andrew's part production.
Most of which is done with conventional manufacturing today globally more than 12 trillion a year on spend.
The core focus on desktop metal is to develop systems and processes that enable the cost effective volume production of end use parts with additive.
And to point out.
A number of companies have taken up this moniker.
Which we first introduced to the market last year, but <unk> is not just about new printing companies.
Not about tooling or prototyping.
Competing with traditional manufacturing on cost and quality.
And surface finish for volume production and use cases this.
This is the fastest growing segment of additive manufacturing and what we believe is the biggest opportunity to capture the share in an industry that is expected to grow on a compounding growth rate exceeding 25% annually to reach $146 billion by 2030.
We have the right team technology, IP resources and product portfolio to deliver on that vision.
We will continue to target investments in our core business as well as inorganic opportunities to accelerate our ability to capture share of the additive manufacturing market.
On the cost effective high volume production of end use parts.
Now, let's turn to slide five.
To drive adoption of aimed to point out we're investing across three primary focus areas.
First.
We want to be the leader in print platforms and technology.
They will make the world's fastest metal printers grew up to 100 times faster than legacy systems in the market.
We also have the largest and fastest area wide polymer printers that allow you to produce parts at a fraction on the cost of prior generation technology.
Of course materials are print platforms are designed to compete cost effectively with conventional manufacturing and we believe these platforms are well positioned to capture an outsized share of the decades of investment in additive.
We also want to vertically integrating to the materials that these printers consumed.
For example, all of the resin use while operating a protocol of our printer for the powders and binders consumed by our metal printers.
We believe there is a huge opportunity here.
Just to expand the set of applications our printers can address but also to create more compelling cost equation for our customers through vertical integration.
And finally on the parts side.
We will look to build a strong offering where we see killer apps emerging for added manufacturing to point out.
Or opportunities that enable materials that previously had high barriers to entry and additive or conventional on manufacturing.
We will be selective where we participate and we require a high return on investment.
Our forest acquisition and the sustainable printing on wood parts and products is an example of an engine part market, where we see tremendous opportunity on.
We review the product portfolio as a whole on slide six we believe this represents the most compelling and diverse set of solutions in the additive manufacturing industry today.
It includes not only solutions focused on AMC now for metal in polymers, but also across biocompatible materials and digital casting applications and we continue to make investments to grow our library of materials and expand into additional high volume applications to best serve our customers, including elastomers and wood.
This is an unmatched product lineup with significant commercialization runway to gain share in the large and rapidly growing additive market.
Every one of these systems are being shipped today with a P 50 expected to ship in the back half of this year on that project is on schedule.
Turning to slide seven on the Binder jetting side, specifically, we will make the world's fastest metal printers.
Our production system P 50, which is our flagship system is a high speed mass production tool that leverages, our proprietary single pass sharing technology printing layers in less than three seconds without sacrificing quality or consistency.
We have a series of other products that are being upgraded to single cash standing technology, including our large format Ram platforms, which will result in incredible productivity.
Thats, an ongoing effort in the company and it gives us a broad set of our platforms to really disrupt the industry with mass production capabilities. The systems that we have on the single pass chatting side ran up to 100 times. The speed that you can achieve with legacy laser powder bed fusion systems.
Also dramatically faster and offer improved performance versus legacy biogenic systems.
And the part quality is fantastic believe that metal parts with excellent surface finish and mechanical properties meeting or exceeding metal industry standards.
Moving on to slide eight this helps illustrate the economics of various technologies on the market.
On the technology, the laser powder bed fusion is great for larger parts such as an aerospace applications for end use parts are more limited due to higher capex and parts cost.
Binder jetting with single pathogen and technology is the lowest cost and process available and it makes very large volume hundreds of thousands or millions of parts more accessible to industries, such as automotive consumer electronics and industrial markets.
Moving to slide nine.
Customer adoption continues to gain momentum as we are seeing solid traction across a number of segments.
We added more customers in Q1 than all of last year combined and this is going to pay dividends in terms of recurring revenue from consumables in the future.
The left side of the slide shows a number of our customers across different sizes of industry.
And highlighting two particular customers on the right side.
<unk> industries is a designer and manufacturer of oilfield equipment in Texas.
On the shop system to produce very complex metal parts with <unk>.
<unk> systems additive benefit has enabled <unk> to deliver parts for applications, such as Don Hope tool components with up to 80% reduction in lead times on inventory, while eliminating fixture and tooling costs.
Another great customers, three composites and additive manufacturing company based in Washington State with over 30 years of experience in the aerospace industry.
On a matter of months from getting started it's really composites has used our photopolymer systems to bring thousands of fly worthy parts.
With many being used by volume commercial aircrafts in the Sky. Today. So these are end use parts that are high volume.
We love highlighting SME is here because they are the engine of the manufacturing world.
And their adoption of our technology speaks to the fact that additive manufacturing is not just a tool for enterprise centers of excellence or division setup to evaluate three D printing.
The SME adoption is a real barometer for the economics on performance viability, particularly as it indicates that the ROI and cost efficiency of our high throughput production technology relative to competitive where conventional solutions.
Turning to slide 10, we have an exciting new offering as a result of a small acquisition. We made at the end of last year for US was a three person company started by the chair of the architecture Department at UC, Berkeley, a professor at San Jose State University, and and Entrepreneurialism, Andrew Jeffrey who has been a longtime leader in the <unk> printing world.
Boris has developed a new process to print wood out of ways and while it makes one three trillion every year of finished with parts.
It's a big business and it comes with complex logistics and significant environmental considerations.
Given that we have half the number of trees on Earth day since human started agriculture 12000 years ago.
If you think of a treat it is essentially made up of two components lignocellulose.
When you make paper you would take the lignin away from the settlements.
<unk> is one of the most abundant waste streams in the world.
The same goes for <unk>, which is mostly cellulose.
With the forest process, we're putting the lignin intercellular space back together.
And inside our printers to make beautiful and use wood parts.
You can make products that look absolutely undistinguishable from conventional with parts.
But they're very cost effective because it's essentially made otherwise.
The true cradle to cradle circular manufacturing story, and we're able to use the same printers.
We have designed to print metal sand like our shop system.
And our Ram solutions.
We have adapted them for this new materials.
And with forest, our growth to flip the annual would spend.
Into sustainable manufacturing via additive.
This is a very exciting opportunity for us and the reception has been overwhelming.
And surpassed every initial expectation.
Expect to hear great things in the future from this effort.
As highlighted on slide 11 desktop help continues to gain significant traction.
Net those shipments grew 64% year over year from the first quarter of 2020.
We considered dental one of the early killer apps for <unk> and metals.
<unk> and ceramics, because almost every dental part is unique.
It's a market that is both growing and adopting additive very quickly.
More than $30 billion.
Dental parts are sold every year by lapsed to dentists, not only a small percentage of our printed today.
We expect that this number is going to grow considerably by 2025 gross much of 75% from the overall market.
We have disruptive programs in all three segments on the markets such as ortho removals on restoration as.
As we're positioned desktop helped to best capture this and other health care market last week, we launched our first major product line, which we call <unk> Sarah.
Sarah is used to create three D printed dental prosthetic indentures with unparalleled performance are flipped Sara Smile is a class one medical device and select surveys as a class II device recently cleared by the FDA.
Now starting to commercialize these products, which come in a variety of colors.
Very fast growing exciting business debt.
It's truly a killer app for additive because every part is different so it's really well suited for this type of production and we are investing in the business to be a major player in this market on.
On slide 12 in order to take added manufacturing into volume production. There are four key hurdles, we highlighted on last quarter's call.
Each is a high bar to compete with conventional manufacturing.
One of the hurdles that has kept additive from being adopted for a very long time these material properties.
Where the technology has to at least match the properties of conventional manufacturing processes.
We're super excited about.
Some of the developments in the materials segment of the added market because they enable an expanding set of applications at scale.
And we're investing organically and Inorganically, where there are clear opportunities to build out our library of best in class materials performance.
One exciting example is elastomers.
Turning to slide 13 today, we are thrilled to announce the acquisition of adapt <unk>.
Adapt at 30 day creates the best photo elastomer residence in the World are performing all major competitors in this space.
Their patented residents to our materials portfolio opens access to the larger last summer market, which is poised for disruption with <unk> two point out capabilities.
Adapt a three day technology was developed out of a DARPA program and has been backed by leaders in the materials industry, including <unk> <unk> West.
<unk> materials and DSM.
This acquisition is really just a natural next step in our collaboration that is already been developing between adaptive <unk> inhibition, which together announced a distribution partnership not too long ago.
We're incredibly excited to combine adaptive <unk> from <unk> capabilities with our category, leading AAM to point out for our polymer systems such as the extreme 8-K.
And capitalize on what we view as a huge opportunity to accelerate high volume end use part production for this market.
Turning to slide 14.
This market opportunity is quite large at $129 million of debt.
That amount.
Only a little over $150 million a year is being printed today, mainly due to cost and speed and we believe adaptive <unk> materials will help accelerate the penetration of am and the overall market as we enable this materials to be printed on our print.
Print engines that offer a new level of price performance.
For an early stage company. They have built a fantastic customer base that we expect to build into mass production.
And we look forward to leveraging our vertically integrated resin manufacturing operations within envision tech.
To commercially produce adaptive <unk> elastomers for customers at scale.
Best in class Elastomer solutions enable a wide range of applications across a wide variety of industries, including consumer medical industrial automotive and oil and gas. These materials really open up the possibilities for our solutions.
Turning to slide 15, when you benchmark about your performance relative to all other players in the field adapt.
Adaptive <unk> materials are in a completely different class when combined with platforms like extreme at Kay. We believe this will translate into many application design wins over time.
Latam or materials consistently outperform on <unk> strength and elongation in or pushing out the frontier of what's possible with additive manufacturing.
Combining this best in class materials performance with our systems, which led the industry in throughput affordability and part quality offers a tremendous growth opportunity.
Finally on slide 16, we wanted to highlight on adaptive 30 customer Dr. Technologists.
The mass produce parts for dust collection systems that you can buy at home depot today.
Economics here worked for and used mass production applications.
This is yet another example of an SME with a great ROI mass producing end use parts with additive manufacturing <unk>.
<unk> was able to transition over 15000 previously injection molded assemblies.
<unk> adaptive <unk>, Robert Elastomer solutions that are fully through the printed reducing reliance on expensive tooling and delivering improved lead times, while performing in line with conventionally manufacturing alternatives is a perfect example of the opportunity we see to bring high volume end use parts to the elastomer market and our partnership with adaptive.
And we're super excited about adding their proprietary patented materials to our expanding portfolio.
With that I'd like to turn the call over to our CFO James Haley for his review of the first quarter financial highlights James.
Thanks, Rick I will provide a summary of our financial performance for the first quarter of 2021 discuss the impact on the recent accounting change to our private warrants.
And with our updated guidance for 2021 on.
On Slide 18, you will see a summary of our financial performance for the first quarter of 2021. Please.
Please note, we will be referring to the financial metrics on a non-GAAP basis reconciliations to GAAP data is included in the final dependence we.
We are pleased to report revenue of $11 $3 million in the first quarter of 2021.
35% sequentially from $8 $4 million in the fourth quarter on 2020, and also up 234% from the first quarter of 2020.
The acceleration was due to the acquisition of the vision as well as an increase in our metal product shipments.
Non-GAAP gross profit in the first quarter was a positive zero point $6 million, which represents a sharp three $3 million improvement from negative $2 $7 million in the first quarter of 2020.
The improvement was driven by the envision tech acquisition mix shifting toward higher margin products as well as our revenue beginning to scale out over the year.
Head costs associated with our manufacturing operations and customer support organizations.
Adjusted EBITDA for the first quarter of 2021.
Was negative $19 $4 million versus negative $18 $6 million in the first quarter of 2020.
The increased loss in adjusted EBITDA was primarily due to increased G&A expenses related to operating as a public company and investments in our core business.
We grew the desktop metal team to over 470 employees today.
100, <unk> at this time last year as we position the company with the right talent for the exciting opportunity ahead.
We ended the quarter with a well capitalized balance sheet, including cash cash equivalents and short term investments on $572 million as of March 31 2021.
This includes completing the redemption of all outstanding public warrants during the quarter, adding $171 million of net cash proceeds.
Moving to the change in warranty accounting pursuant to new guidance released by the SEC on April 12, 2021, we changed the historical accounting for the private placement warrants are assumed in the business combination to record a liability for the fair value of these warrants.
Any subsequent change in fair value adjusted on the liability and recorded a noncash non operating gain or loss in the statement of operations.
As a result of this change we filed an amended 10-K for 2020. This morning, reflecting these changes.
Since all outstanding private placement warrants were exercised by March 2nd 2021 impact is only historical in nature.
Change is also strictly accounting related and does not impact on business market on opportunity investment prospects or future valuation.
Finally, moving on to our guidance, we are reiterating our expectation to generate revenue in excess of $100 million.
And full year 2021, we continue to plan to exit the year with an annualized run rate on milk Street, and $60 million and expect to see sequential quarterly growth throughout 2021.
We are updating our adjusted EBITDA outlook to be in the range of negative <unk> $60 million to $70 million.
This updated guidance reflects increased investments in areas of our business, where we see outsized growth opportunities, including desktop hills adaptive <unk> envision tax and our organic business.
With that I will turn the call back over to rich.
Thank you James I'm pleased with the strong start to the year, we are well positioned to fast track growth with momentum in our core business and exciting and organic opportunities. We remain very optimistic about sequential acceleration during the second half of the year as we launch additional products and start shipping our <unk> systems.
Integrate our recent acquisitions and capitalize on our expanded portfolio of material capabilities.
We're focused on building the company and making decisions to achieve long term value creation I am confident we have the portfolio of solutions and strategic positioning and other resources to best capture share and added manufacturing by.
By delivering <unk> solutions for high volume and just parts with that I will now open the call for questions operator.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble on roster.
Again, if you have a question. Please press star then.
One.
Okay.
Our first question comes from Noelle Dilts from Stifel. Please go ahead.
Yeah.
Hi, guys good afternoon.
Hello, Noel how are you hi, great.
Okay.
Hoping that you could comment on.
Sort of what Youre seeing in terms of the supply chain and also run logistics, there's been a lot of talk on the industry about.
Some challenges there and what youre seeing today, and and if youre, taking any actions to kind of avoid potential issues down the line. Thank you.
Absolutely.
It's something we monitor very closely and we are.
Being proactive about it and trying to ensure that we don't have components that we won't be able to source.
At the scales that we do.
We want.
We have made some quick changes in some of our products in anticipation of.
Shortages.
But it has not been an issue and we don't actually expect it to be an issue or affect our numbers in the future given the planning that we're putting in place I guess, maybe DLP chips could be the one area that we monitor pretty closely but we are.
I hit on the curve on that one and doing our best to ensure that it is not going to be an issue on on future quarters.
So far we feel pretty good debt debt.
It's not going to impact us.
Okay, Great and then basically.
Sorry go ahead.
By the way. This is a this is one reason to adopt additive manufacturing for mass production is a lot of these impairments and supply chain.
Inflation coming on the horizon on things like that are difficult this with.
Flexibility of that supply chain or are the types of things that come up when we talk to large.
Large customers. They are excited about solutions that give them flexibility and free them from.
Some of the approaches that debt.
For example, COVID-19 in India has been a huge issue for many of our customers I was just with a.
<unk> CEO of a major company the other day, who.
Is very excited about using our technology, because he's got suppliers in India that debt.
Have a.
Had issues delivering things given the critical situation that they are facing there. So I would say this is a technology that that puts a lot of redundancy on on supply and enables you to react quicker.
So we.
We see it as tailwind so on the on the chip side is the only thing on the horizon, but our products.
Are such that we don't expect this to be an impairment on our ability to deliver our numbers this year.
Okay, Great and then one housekeeping question from me I was wondering.
On the system, we're on the materials, but do you have the mix of organic revenue in the quarter versus contribution from ambition pack.
So that is not something we're disclosing today on our last call. We did indicate that we expected roughly 60% of our revenues to come from DM organic and 40%.
From an organic and I would say, we're still trending in that direction.
What we will see quarter to quarter there'll be some variances.
But really on full year view has not changed at this point.
Okay, and then last just on.
You've expanded the portfolio through acquisition on Rick could you just touch on materially on on what Youre seeing or were the success youre, having so far in terms of cross selling and how youre kind of thinking about really leveraging this more expanded portfolio. If you look forward. Thanks.
Absolutely I think we see great success, there on the ability to cross sell as well as.
Yeah.
Bring more solutions to two customers globally on both.
Bringing.
Things like.
Our direct print solutions to jewelry on dental where ambition to cut a long.
Vertically integrated presence and a direct.
I would say.
A channel that was targeted towards those industries and we're also seeing.
Very good success with industrial customers.
That are adopting our our metal printing solutions at scale, where we can help bring.
Those types of products and.
I'm Super excited about the work that we're doing on elastomers with extreme 8-K, and that's on a new market for us but.
But we have the highest performance.
Printed last summers in the world now.
And we have the largest.
In high.
High throughput.
Copy print solutions now as well so combining those and it's the same.
Type of customers that buy metal printing systems for mass production. So I think it's a winning combination and youre going to see these types of products flow throughout.
You could imagine.
<unk> is being used in.
Furniture related.
On products that would then go together with our forest printed with part.
You could see them in on automotive component that would go together.
In the same type of customer that's adopting a metal printed component. So there is definitely the ability to provide more comprehensive solutions and I think customers appreciate.
The fact that they now have.
A really good portfolio.
Our channel benefits from these as well so it's synergistic all throughout.
I think the one thing I would add to be beyond sort of some of the cross selling you referenced I think one of the things we're really starting to get momentum on is with some of that those core envision tech product lines, where now they have the full balance sheet of desktop metal. So Rick has been on a number of calls with sort of your true.
Marquee fortune 500 customers without really wasn't.
It is easier to sell for the legacy envision tax, but now with all our marketing firepower as well as well as our capital.
We're going to continue to see lots of growth opportunities there.
Great. Thanks, so much.
The next question comes from Shannon Cross from Cross Research. Please go ahead.
Hi, Thank you very much for taking my question, Rick can you talk a bit about.
What you're hearing from customers, who are purchasing the P. One in there their interest level on that is that something that you know, they're they're buying and you know pre buying the P. 50, and then also what does the pipeline look like for the P. 50 has it increased.
You know maybe last put numbers out and how how solid is that pipeline feel thank you.
Thank you Shannon great to hear from you.
Pier one interest is.
At an all time high that product.
<unk> is doing extremely well.
We are making as many.
It's a very good product it is not used in lieu of a P 50, while it can be used for mass production of parts you primarily use that technology to qualify components.
All of the settings translate perfectly to our P 50.
One of the benefits of that system is that you can get a really quick build box in under an hour and it's very very high throughput three seconds or under three seconds to layer and then you've got a solution to grow into higher volume production.
Most of the Oh, I'd say many of the customers are buying <unk> order to P 50 as well.
It is.
In some markets like jewelry, you could do very well just with Ah.
That'd be one price for example for particular types of materials that would be.
Particular shade of gold or things like that I would say it is.
The <unk> demand is very strong it continues to visit.
They are.
Yeah.
We don't see any slowdown in demand for that product and we're really excited that program is on schedule. We are really excited to get that out in the second half weighted year like like we discussed in previous calls and we have a lot of our best people.
Working to execute that and.
I continually talk to large customers, who visit plants with and they see you.
At the number of Skus that would be a breakthrough with the type of product and it's a large number.
In plants.
I was just talking to a fortunate from another company.
Earlier, this week, where it's.
Yeah.
Okay.
It could be very very large business. So.
I see that product is.
Still the foundation of.
A lot of our future growth and we're really excited about getting that to the market.
Later this year.
And the increase in EBITDA loss and the increased investment.
Are you determining where youre going to put your investment dollars I mean, what kind of ROI metrics are you looking at.
What's the process I guess I'm just trying to understand if this is gonna be something where you know every quarter, we see increased EBITDA.
So with our losses. So if that's the case like how do we determine that the success of your investment.
Absolutely I mean, we have a hurdle rate and I think we do look at.
Uh huh.
These.
What's the strategic.
We look at our.
Everything we're doing at the company has a long term view in terms of getting.
Larger share and just pardon mass production in the long run so.
If you buy a company I would say the things that are going to fluctuate the EBITDA.
A little bit maybe some of the M&A transactions that we would pursue if there's a technology that we think are strategic and we weren't having a fold.
It's a company that is not.
Uh huh.
Is it sort of made the transition to being profitable yet that would have an impact at the same time.
There are some.
On businesses that we may acquire that that are profitable on that.
We're doing it also for strategic reasons on when we put them on our network, we would make them either more profitable or where or we'd be able to grow faster. So I would say.
Yeah.
We would expect to be within the guidance. We just gave you.
For for this year and.
We expect to what we're trying to do is accelerate our timeline that we put out last year. When we initially went public.
And tried to get get to $1 billion in our.
Faster time frame than our initial.
Target and so everything we're doing is with a view of having a double digit share.
Share of that $146 billion.
Market by the end of the decade, so whether it's the transactions that we would pursue on the print engine side on the vertical integration into material side or into a particular advanced parts.
Our technology business that we may acquire so these are all <unk>.
Things that we look at with.
For sure where the hurdle rate and the team here has a background investing and getting returns out. So we do look at it.
As a financial exercise and we.
We are.
We're excited about our.
About the different activities that we've got going on yeah. The one thing I would add though too is we sort of on.
On Shannon.
Increasing.
The range by $10 million a portion of that was for organic investments as well we continue to qualify new materials. We continue to focus on driving down margins one of the things <unk>.
For the first time here is that on a non-GAAP basis, when you back on the Irma and the amortization for the envision tack transaction I mean, we.
There are positive margin, we're doing everything we can to accelerate that so if they are outsized returns weaken house.
We're going to go for it I mean, we are looking at these investments be it organic or integrate organic a lot of times, it's really.
Two to three year sort of payback before you really start to see the dividends on the M&A side large accretive transactions, they're going to be very costly I mean, I think there is some some some on the horizon, but really what we're trying to do to Rick's point is capture market share and do everything we can.
Increased revenues and improved margins.
Again, if you have a question. Please press Star then one.
The next question comes from Greg Palm from Craig Hallum Capital Group. Please go ahead.
Hey, guys. This is actually Danny acreage on for Greg today, Thanks for taking the questions.
Our pleasure I appreciate I appreciate the color on on kind of the expansion on the customer base on a quarter.
Accelerating in Q1, I guess from like an end market standpoint, or anything you can give there.
Strength or weakness and maybe where are those those customers are coming from.
Yes.
I mean I think it's.
<unk>.
If you look at it from a killer apps point of view some of the markets that are growing very fast and where we think there's a huge long term opportunity is dental.
Over $30 billion worth of parts sold every year.
By lab to dentists.
And.
A lot of that is analog today, but its writings on the wall that most of it is going to be printed and I think thats on our markets tipping very quickly and where we've got best in class materials.
Significant share and we're growing way faster on the market.
But you can go across segment by segment by segment. The truth is this is a market that as a whole is growing at.
The added market is growing at about 25% and we're growing way faster than the market. So.
I'd say we.
We see the same thing happening in the adoption of our metal products, where we've got great reception.
These are horizontal technologies can be used that can be used for everything from machine designed to automotive to oil and gas variety of other applications.
So it's a general purpose tool and.
It has all sorts of benefits as we've talked over the years.
In terms of.
The flexibility that that gives you, but now we are able to do it cost effectively and compete with congressional on manufacturing and do it on the throughput that you can go to market with <unk> printing.
Got it that's helpful and then maybe just switching over to.
From a on.
On a geographic basis looks like American just looking on the filing here. It looks like America is a pretty good in may.
It may be.
You may I didn't see the same kind of growth.
Somewhere like the Americas, and I think youre seeing that across a lot of the market that they might be lagging behind in COVID-19 recovery.
Anything that you can give there on what youre, what youre seeing there right now yeah, I think thats accurate I think that day, we saw.
<unk>.
Q4, Europe was stronger than Q1, but I think it was primarily a reflection of COVID-19 and some are on closings that happened last minute, but we are.
I mean on from a pipeline point of view.
You see pipeline growing on all continents and.
We have product in.
Yeah.
New product demand globally for our products.
Yes, it's pretty good it definitely feels like many of these these variances, though we're just short term in nature definitely are cute Q2 pipeline is looking very strong.
In EMEA. Thank you just again as you highlighted some of the challenges with COVID-19 and what not there's just there's a lot of movement right now.
Morris.
As longer term trends.
You could estimate.
Even though Asia is a major manufacturing hub right now we see our near term.
Baseline is 40, 40, 2040, Asia, I'm, sorry, 40% U S, 40% Europe, 20% Asia overtime, I think it will even itself out as this technology more broadly adopted in Asia.
Okay got it that's helpful. And then maybe if I could sneak one more on here on on the shop system I think last quarter, you mentioned that.
That was also kind of being impacted by COVID-19 still on the recovery there any update on traction youre seeing from that one.
I think the traction is very strong.
Alright, we see.
Sales of new applications for that product now that we've started to.
Get it out there on higher volume and.
We don't see COVID-19 as a major impairment for poor demand.
Uh huh.
Any other products now I think we're kind of.
I mean at least in Boston were working out of the office and it feels very much like business as usual.
This is <unk>.
Things are back to a more normal state.
Definitely earlier in Q1 things were still a little more challenging I would say, we all feel pretty good where we sit.
Sit today.
Wrapping up Q1, and halfway through Q2 I definitely.
To Rick's point, we're feeling back to normal and not really seen any any sort of COVID-19 in overhang at this point.
Okay. Thanks for taking the questions.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Rick <unk>, Our CEO, chairman and founder of desktop metals for closing remarks.
Thank you.
Again very excited with all the progress that we have going on in.
I want to thank everybody for joining the call today as well as all of your interest in desktop metal and as always I, especially want to thank.
The more than 470 desktop metal employees for their continued passion and dedication and we look forward to updating you on our second quarter in 2021.
A few months.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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