Q4 2021 Desktop Metal Inc Earnings Call
Greetings and welcome to your desktop metals fourth 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.
Pretty much require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now I'd like to turn the conference over to your host.
Mr. Jay <unk>, Vice President Investor Relations. Please go ahead. Thank you and thanks to everyone for joining today's call with me today are Rick <unk>, CEO and co founder of desktop metal and James Daley CFO desktop metal.
Please note that our financial results 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 with a link at the same website the.
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.
I'd like to start by letting our listeners know that our independent public accountants are in the process of completing our audit for 2021 and the results announced today for our fourth quarter and full year 2021 are preliminary unaudited and subject to audit adjustments.
We have filed a form <unk> 25 notice with the FCC extend our deadline for filing our Form 10-K for 2021 due to the tighter deadline associated with our recent transition to a large accelerated filer status as well as the inclusion of X one financial information in our consolidated audited financial statement for the first time.
Since the November call 2021 acquisition, we fully expect to file the 10-K within the 15 day extension period.
Now I'd like to refer you to our safe Harbor disclaimer on slide two of the presentation.
Today's call will include forward looking statements.
Forward looking statements reflect desktop metals views and expectations only as of today March eight 2022, and actual results may vary materially based on the number of rest of uncertainty.
For more information about the risks that may impact desktop metals business and financial results. Please refer to the risk factors section of our Form 10-Q filed by the company on November 15th 2021. In addition to the company's other filings with S&P we.
We assume no obligation to update forward looking statements.
Additionally, during this presentation and the following Q&A session, we may refer to non-GAAP measures, including EBITDA, adjusted EBITDA and non-GAAP gross profit.
These measures are intended to supplement but not substitute for performance measures calculated in accordance with GAAP.
Our financial results 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 for CEO and co founder of desktop metal.
Okay.
Thank you Jay good morning, everyone I'm excited to host everyone on our Q4 2021 call today I plan to review the results for the fourth quarter and full year 2021 and provide our financial outlook in detail our strategic priorities for 2022 .
In addition, as we.
All of this as a public company and have made a number of important strategic decisions last year, we'd like to highlight a few of those key develop and provide an update in further detail our operating model.
Beginning of the presentation on slide three we started desktop metal to enable mass production would be additive manufacturing in a cost effective way versus conventional production processes.
Call. This a M two pointed out.
A long term goal is to use this technology to achieve double digit share of the 100 billion dollar plus market by the end of the decade.
Mass production is the fastest growing segment in the added manufacturing space.
Businesses around the world seek to overcome supply chain disruption.
Production costs and released breakthrough new products, we make every decision of desktop metal through the lens of achieving this fall.
Shifting to our financial results on slide four that's something that'll conclude a 2021 with the best quarter in the company's history.
Consolidated revenue for the fourth quarter 2021 was $56 7 million representing sequential quarterly growth over 123%.
And year over year growth of over 570%.
We saw broad based growth across all our a M brand and all of our technologies underpinned by a record quarter of revenue from our metal platforms. Excluding contribution from the X. One acquisition revenue for the fourth quarter was $41 2 million, representing 62% quarter over quarter growth.
We saw yet another quarter of gross margin expansion with non-GAAP gross margins, increasing to 31% in the fourth quarter up more than 460 basis points sequentially.
This was our sixth consecutive quarter of gross margin expansion.
I learned and full year results on the right side of the slide consolidated revenue was $112 4 million for 2021 .
Excluding contributions from eczema acquisition in the fourth quarter revenue was $96 9 million, representing more than 480% growth over 'twenty 'twenty.
Overall revenue growth was driven by very strong performance in our metal offerings, including 163% organic growth year over year.
Desktop metal was the fastest growing publicly traded added manufacturing company in 2020 one.
non-GAAP margins for the year expanded to 27%.
A meaningful increase over 'twenty 'twenty.
And we ended the year with a strong cash balance of $171 7 million in cash cash equivalents and short term investments.
Turning to our financial outlook, we continue to see robust growth across our full portfolio and expanding customer base, we expect 'twenty to 'twenty two to be another record year for desktop metal.
As a result, we're announcing guidance of approximately $260 million in rebate for 2022 there.
This represents 131% growth over 2021 .
We also expect adjusted EBITDA to be approximately negative 90 million. We believe now is the time to prioritize investing to capture market share as the added manufacturing marketed black in order to reach the potential over a long term business model.
We do have our eye on long term profitability and therefore, we are reaffirming our commitment to exit calendar year 'twenty two 'twenty three breakeven on an adjusted EBITDA basis, as well as exceeding $1 billion in revenue by 2025.
We will provide more color on our plan to Rich's calls in a moment.
Turning to slide five.
2021 was a revolutionary year for desktop metal.
And I could not be prouder of what team D. M has accomplished in our first year as a public company.
We made huge progress both organically and inorganically towards positioning the company to achieve double digit share of the additive market by the end of the decade.
We now have over 20 print platforms, which allow us to target a large number of applications across volume and performance requirements.
We have a highly refreshed product portfolio, including nine product launches in the past five quarters that we expect to contribute meaningfully to this year's results.
And I can't understate, the team's relentless hard work to launch the production system P 50, which just started shipping a few weeks ago.
We dramatically expanded the number of materials principle in our systems by 12 times.
We now have one of the widest portfolios of Andrew's materials for mass production with additive for a diverse array of applications in industries, ranging from automotive consumer electronics to oil and gas.
Our total installed base across our platforms is now 14 times larger from the beginning of the year, providing us with a large and diverse set of customers through which we can drive both consumables revenue and upsell or cross sell our platforms I said look for high performance systems, our new material offerings.
We executed on the M&A strategy, we articulated when we went public. These transaction is buried in size the strategic purpose, but all were geared towards increasing our share of the additive manufacturing market and the long term and positioning the company for leadership in mass production of end use parts.
Between these acquisitions and internal R&D, we have bolstered our IP portfolio to over 650 patents and patents pending arming us with a robust defensible technology platform with a significant competitive moat.
Early in the year, we launch desktop help to focus on patient specific additive manufacturing solutions for the health care and dental industry.
This is a massive market with over 80 billion in health care and plants that overtime will become patient specific and over 30 billion in annual spend in respiratory and used parts in the dental market.
Over the course of the year desktop health became an established brand supporting thousands of dental labs and practices.
Led by the launch of our Revolutionary New Einstein for polymer printer series, specifically designed for the health care market.
We also launched an initiative to build out that felt lap a vertically integrated parts platform that provides digital solution design services and parts production capabilities for health care would.
We view of dental and Biofabrication, that's critical killer apps for additive because parts in these market segments are typically unique to the patient and only a small percentage are printed today.
This strategy reinforces our leadership position in dental and is also highly accretive to our overall margin structure.
While it accelerates our path to profitability.
In 2020 . One we also introduced forest, a new process that leverages, our existing binder jetting platforms to print and use what parts in volume using traditional wood manufacturing waste products.
We've seen great success with forest and I've already sold millions of dollars of printers to produce parts through this process.
This is a very exciting opportunity and its still in its early stages.
But our goal is to flip a portion of the one three trillion dollars a year spent on what parts to a more sustainable manufacturing process we added.
And finally P. M grew from 200 to over a thousand team members, that's collectively and passionately work whenever mass production of end use parts.
And to point out.
Customer adoption continues to be really exciting as more and more companies of all sizes are embracing the benefits of additive and specifically our high volume production capabilities.
Significant increases to our customer installed base last year through a combination of horizontal and vertical focus areas across a range of industries, including automotive healthcare and dental.
Sumer products industrial Aerospace defense and machine design among others.
This is a blue chip customer base that in many cases.
It's just beginning their journey in additives.
One of the benefits of the strategic moves we've made over the last year is that our wider portfolio of print platforms addresses a more diverse set of applications and end to end markets, reducing our exposure to any one industry.
Fast growing robust business with very little account concentration, which we believe provides us with better pricing power in the market.
Moving on to slide seven.
We made great progress in 2020 , one, but we're also laser focused on five key strategic priorities for 2022.
First we are dedicated to maintaining our pace of organic revenue growth at scale.
Desktop metal is a growth focused company and after achieving triple digit organic revenue growth last year, we're determined to maintain that momentum preserving our position at the top of the industry for growth.
Second we're focused on growing our market share across key vertical while we have been very encouraged to see broad based industry adoption from customers of all sizes.
2022 we plan to focus more on sizable market verticals that can deliver outsized growth opportunities.
Three in particular, automotive consumer electronics, and dental and health care.
Third we're intensifying our go to market efforts on land and expand opportunities with Hyperscale customers more specifically this means cultivating and maturing applications with major strategic accounts that have hyperscale potential over the next three to five years.
These opportunities with brand name Fortune 100 companies have the potential to not only be needle moving for nationally, but attract awareness to the capabilities of our mass production additive solutions.
Our fourth strategic priority for 2022 is to demonstrate a path to profitability fund continuous strong growth into the future.
This includes reaffirming our commitment to exit calendar year, 'twenty twenty-three breakeven on an adjusted EBITDA basis.
He steps to achieve this goal include combining topline growth with controlled expenses and operating leverage to maintain our annual margin expansion.
We also plan to drive operational efficiencies and expense reductions throughout the business, including rationalizing the current portfolio.
<unk> expense structures and consolidating our global facilities footprint just to name a few initiatives.
Finally, we're focused on managing the cash on our balance sheet.
While our current cash position is strong.
We will be disciplined in our capital allocation efforts focused on investing only in opportunities, where we see potential for both outsized growth and operating margin expansion.
Additionally, as we mature we're also targeting opportunities for working capital improvements through increased focus on inventory reduction and supply chain synergies.
We will measure our success this coming year not only based on our financial results, but also on how we execute on these five key strategic priorities.
Moving on to slide eight.
What are your 'twenty, one was a phenomenal year for our industrial business. We saw strong diversified demand across all of our available platforms. We made important strides in extending our competitive boat in binder jetting, the fastest growing segment and production parts.
In 2021 we grew to become the number one metal binder jet company by unit share in the world.
In its first full year the shop system was the number one selling product in the metal binder jetting market, we're very proud of that.
And we expanded our materials portfolio across seven different metal print platforms to offer the industry's largest portfolio of compatible alloys.
The absolute market share leader in metal Binder jet anyway, you slice of data.
As we ramp the 50 in 2022 and beyond we're poised to extend our lead with this revolutionary system that creates a new category of throughput and cost performance for metal additive manufacturing.
Last year.
We also entered the industrial part of polymer space through our acquisition of ambition now rebranded he tech and adaptive three D.
These acquisitions opened the aperture of our materials portfolio outside just metals and now position the M to offer a host of exciting new applications.
A lot of these we launched the extreme 8-K, the largest production grade the L. P. Three D printer in the world for high volume production.
And in conjunction with the 8-K launch we introduced a portfolio of best in class elastomers that outperformed all major competitors on tear strength and elongation.
We're just beginning to scratch the surface of the growth opportunity created by these solutions.
And finally, we made a landmark acquisition and the purchase of X one cementing our leadership in area wide a M technologies for mass production.
We've been hyper focused executing our integration strategy, and we're already creating near term value where possible and.
And see significant opportunities for value accretion long term.
Some of which James will speak to in his section.
One is 22 is setting up to be another exciting year for our industrial platforms and we have a few strategic priorities that we're specifically targeting within this market segment.
We're focused on scaling our metal mass production solutions.
Second we want to maintain the momentum within the SME customer segment by accelerating deployment of the shop assistant.
Third we are well positioned to grow market share of our industrial polymer platforms.
There's a lot of opportunity for our solutions in this segment.
Fourth.
This year, we're especially focused on driving broader adoption in digital castings. This is a process, where you really print balls to get high volume parts, such as vehicle our aerospace components.
This is an underrated opportunity in additive.
In this market, we plan to leverage our technology to drive mass market adoption by extending high performance capabilities of our S. Max and S. Max Pro platforms.
And finally, we plan to strengthen our foothold in strategic industrial verticals by developing hyperscale opportunities that offer powerful long term growth.
Turning to slide nine.
We are thrilled to announce that we have started shipping production system pizza.
Initial customer as Stanley Black <unk> Decker.
One of the landmark Great American manufacturing companies.
This is a significant milestone for desktop metal and while it took a little bit longer to develop than initially anticipated.
Careful investments of time and capital will yield a major competitive moat.
Groundbreaking products such as the Tesla model, three Apple Macintosh and I B M 360, each required multiyear development efforts, but in each case these products leapfrog competitive offerings and ushered in a new era for their respective companies and industries like these other products will be the P. 50 represents a watershed moment.
For additive manufacturing.
The three D printing industry has been characterized by continuous incremental op.
Products offered by legacy players have steadily improved a little bit every year.
With four years of development and nearly $100 million in investment.
Robust IP portfolio behind it.
The P 50 is a groundbreaking platform that opens exponential improvement in performance and will create a massive competitive mode for desktop metal.
The system principal layer in roughly three second leading two batches of hundreds of thousands of parts in a matter of a few hours.
This speed enabled group was up to 100 times and cost as low as 120th those of legacy laser powder bed fusion systems in.
And the P 50 does all of this without sacrificing quality or repeat ability.
The systems unparalleled performance and economics are enhanced by the world's largest library of fully characterized production materials in metal binder jetting.
We continue to scale, our manufacturing ramp and support the growth. We've seen this offering we expect the production system P. 50 platform powered by our patented single past getting technology to be one of the major pillars, we build our long term business around and were delighted to have Stanley Black <unk> Decker as the first customer of this landmark system.
Shifting to our health care and dental business.
In a little under a year since its launch and leveraging ambition Tech's leading the L. P printer platforms post acquisition.
Desktop health has made tremendous strides to position us extremely favorably in the health care dental market.
In February .
Stop health introduced the Einstein's theories of dental three D printers, including three on this system is designed for the production of engines dental parts.
Leveraging patented technology, the Einstein's theories brings exceptional speeds industry, leading accuracy and innovative features like close to printing and beta chambers to this market.
Desktop health also recently launched several new materials in particular like Zara smiled surplus received FDA clearance for permanent dental indication when used in tandem with Einstein three D. Printers. This new materials allow dental providers to print same day smiles, including crowns bridges, veneers and full and partial.
<unk>.
The Einstein Netflix there are product launches position us to continue our already strong momentum in dental.
And finally, we launched an expanded our desktop platform.
And end use three D printed parts offering under desktop health that vertically integrates digital solutions design services and parts production capabilities for the dental market today.
This is a huge rapidly growing market and emerging killer app or additive because these parts are patient specific.
That's something that is a strategic priority first.
It immediately accelerates our growth in dental where we have strong competitive technology and material on bad <unk>.
Second.
Rapidly digitizing desktop by properties enhances their profitability by improving efficiency relative to milling or analog production.
Desktop labs is accretive to our overall margins and it accelerates our path to profitability.
Third desktop labs at unique digital workflows and technology enhanced support that we plan to bundle with our new Einstein printers to deliver seamless chairside printing instead of dental practice.
Effective chairside capabilities will unlock on unique competitive advantage for desktop help.
And finally this efforts will create a digital first.
Single visit treatment options for dental clinicians to improve patient outcomes and dental practice economics over time, we also intend to leverage this platform to provide biofabrication solutions with proprietary materials currently in advanced stages of research and development.
It was an exciting year for desktop health and as we've hit the ground running in 2022 with the iPad launch.
We're also focused on a few key strategic priorities first we aim to accelerate the transition of the dental industry to additive through our category, leading hardware and differentiate it mature capabilities second.
Want to focus on growing desktop lapsed platform for all those reasons just discussed third we intend to launch and scale hit product and killer applications in the dental and health care space.
Executing to these calls will position us for continued desktop health success in 2022 and the years beyond.
And with that I'll now turn it over to our CFO , Jim Taylor to cover our financials Jean.
Thanks, Rick before I get to our financial results and outlook I'd like to step back and provide a little more color on our operating model.
Our business went through significant evolution and transformation in our first year as a public company and as a result, I think it is worthwhile to update the investor community on our financial strategy and provide more support on how we intend to close the gap from where we are today to our long term revenue and margin.
As well our path to profitability.
I'll start on slide 12 with revenue growth today.
Bulk of our topline revenue is generated through sales of our additive manufacturing systems. So our primary focus.
To maximize our growth is driving accelerated adoption of our technology solutions.
We have invested aggressively to diversify our print platforms across price points capabilities in materials, which we believe best positions us to land customers with an initial application for three D printing before expanding across materials, we're into higher volumes with additional systems. These cross sell.
Selling and Upselling opportunities will be a key revenue accelerator across our wider customer base and we're already seeing early examples of metal customers evaluating photopolymer solutions and vice versa.
We sell these solutions through our hybrid distribution approach, we augment our leading global distribution network of resellers with an.
Internal direct sales force.
<unk> this hybrid approach to accommodate our broad product portfolio, which is easy to install and service platforms ideally suited for resellers as well as higher asp's and longer sales cycle platforms more suited to direct selling.
In 2022 we are placing a heavy emphasis on positioning our channel partners for strong growth by doubling down on channel sales enablement, including more robust inside sales activities deeper reseller engagement enhanced training and additional marketing resources.
While ramping the channel on new products.
Significant time and effort, we believe that the channel is a critical path to scaling our growth in years to come, especially as our resellers cover more than 65 countries around the world and are within a short drive of a significant portion of the worldwide manufacturing sector location.
A direct salesforce complements the channel with a focus on major accounts, expanding our footprint and multinational organizations and sales of our larger more complex solutions such as the production system P 50 X 160 pro and S. Max Pro.
This team is key to establishing lighthouse customers in key verticals and will work closely with major accounts to cultivate applications that will yield hyperscale opportunities Rick discussed earlier.
We also view the supply chain as a lever to accelerate revenue growth at desktop metal we have concentrated our efforts in technology. The development, mostly outsourcing manufacturing to third parties through a build to forecast model that creates minimum lead times from order to delivery.
This has been a competitive advantage for our sales teams and has resulted in shorter sales cycles for our equipment.
We believe that by shifting relevant products from our acquired portfolios towards this model, we can capture capex budgets at the moment of interest accelerating sales cycles across the business and expand the deal capacity of our reseller network and direct sales force.
Finally in 2022 we are focused on driving outsized growth in EMEA and the impact by expanding our go to market infrastructure in these regions.
While these two regions combined generated roughly 30% of revenue in 2021, we anticipate with their contribution will increase as a percentage of overall revenue in 2022 as a result of our efforts.
Net maintaining a focus on long term gross margin expansion is critical to our path to profitability.
Over the past year scaling out of fixed overhead costs like customer support and manufacturing operations included in Cogs.
Offline growth has been the biggest factor in our six consecutive quarters of gross margin expansion.
Additional scale, we will continue to be the primary factor that drives gross margin improvements into 2022 now that our business is at a larger scale, we expect seasonality to become a more significant consideration.
While we expect gross margins to continue improving on an annual basis, we anticipate quarterly fluctuations as a result of the seasonality.
That said, we are also taking proactive steps to realize gross margin improvement. The first is a focus on product mix through product rationalization and consolidation. This is a multiyear effort that we have already started.
Constantly evaluating which platforms, we should continue to evolve going forward and we plan to concentrate our go to market efforts around higher margin offerings. The latest product mix as we grow our installed base of mature up in running customers.
High margin consumable stream of powder binder, and resins that they generate will be accretive to margins as well.
While our growth in system sales will continue to outpace our consumables in 2022 we're already starting to see consumable revenue become more meaningful on an absolute basis and this razor razorblade strategy is an important element of our long term operating model.
We are also taking steps to reduce product costs through design changes multi sourcing and volume purchasing and we see great opportunity to improve product margins by optimizing our manufacturing supply chain efforts.
We intend to transition manufacturing to either our in house teams or third parties based on what makes the most sense for each individual product and.
To improve the cost structure for the overall portfolio overtime, we anticipate this reallocation and consolidation of our manufacturing footprint will yield significant gross margin accretion for the company and accelerate the path to our long term gross margin percentage target in the fifties.
Moving on to our expense structure, while we continue to invest to prioritize growth, we're placing a greater emphasis on controlling costs in 2022. As a result, we expect expenses to continue to meaningfully decrease as a percentage of revenue. This year that said we.
We believe additional investments are critical to position ourselves for longer term growth.
In R&D, we anticipate incremental increases in spend as we continue to drive new product development, while dedicating meaningful resources to enhancements and cost reductions of our existing platforms. Our business will always be R&D focus, but as we mature we expect to be able to harvest. These early <unk>.
Once in R&D, which will glide down.
Both as a percentage of revenue and total operating expenses overtime.
20th due to increases in sales and marketing spend are critical to executing our growth plans in particular launching and ramping sales of new products.
We also continue to invest in our long term go to market infrastructure. We believe now is the time to invest here. So that we're best positioned to capture sales opportunities as we hit inflection points and the adoption of additive across various industries finally, while G&A spend jumped in 12.
'twenty one to support our first full year operating as a public company and acquisition integration activities. We anticipate that growth in this expense category will be more limited going forward as our existing infrastructure scales nicely with expected top line growth.
Turning now to slide 13, I will now discuss our fourth quarter and full year 2020 . One financial results. Please note, we will be referring to several financial metrics on a non-GAAP basis.
Reconciliations to GAAP data is included in the filed appendix.
Starting with the fourth quarter, we're very pleased with how the team finished off the year consolidated revenue was $56 7 million, excluding an X one <unk>.
Revenue was $41 2 million up 62% sequentially from the third quarter 'twenty or 'twenty one.
Revenue strength was broad based across all of our offerings and particularly strong in our metal offerings.
We also saw our sixth consecutive quarter of GAAP and non-GAAP gross margin expansion.
non-GAAP gross margin increased over 450 basis points sequentially to 31% for the quarter the highest in the company history.
Gross margin expansion was primarily driven by operating leverage as revenue continues to scale across overhead costs as well as favorable product mix from metals platform strength going forward and integration of recent acquisitions and ongoing supply chain challenges may result in quarter to quarter fluctuations in gross.
But we expect overall to trend in a positive direction.
Adjusted EBITDA for the fourth quarter in 2020 , one was negative $25 7 million versus negative $18 5 million in the fourth quarter of 2020. The adjusted EBITDA decline was due to investment initiatives are detailed on the previous slide that began in the fourth quarter 2020 , one as well.
Is it absorbing losses from recent acquisitions as we invest with a long term growth opportunity for our business.
Turning to full year financial results, we hit our marks on all revenue guidance figures. We provided on our last earnings call consolidated revenue was $112 $4 million for the full year 2021.
<unk> core revenue from our desktop metal and envision tax businesses of $76 $5 million.
Excluding the X one acquisition revenue was $96 $9 million, including year over year growth of 16, 3% and our own organic metal offerings non-GAAP margins jumped to 27%.
For 2021 compared to be a negative for 2020, driven by operating leverage as revenues began to scale out of fixed overhead costs and adjusted EBITDA for 2021 was negative $96 $1 million.
And finally, we are well capitalized and the air with 271 $7 million in cash cash equivalents and short term investments as of December 31, 2021.
Managing cash is a key priority for 2022 and beyond and we will be judicious on program spend and any other activities.
And evaluate these on a return of invested capital point of view.
Turning to this year, we have outlined our 2022 revenue outlook on slide 14, as Rick discussed we expect to generate total revenue of approximately $216 million for full year 2022 representing a 131% growth over 2021 and an adjusted.
EBITDA of approximately negative $90 million well. This adjusted EBITDA outlook doesn't include moderate increases to our operating expense run rate exiting the fourth quarter of 2020 . One. We believe now is the time to maintain the investments and the growth opportunity of the business in order to.
<unk> market share gains and reached the potential of our long term business model.
Long term I'd like to reiterate our financial goals as a company we are committed to achieving $1 billion in revenue by the year 2025, we expect to exit calendar year 2023 on an adjusted EBITDA breakeven basis, and we aspire to reach double digit share.
Of the additive manufacturing market by the end of the decade.
With that I will turn the call back over to Rick.
Thank you James.
In summary, our business performed exceptionally well in the fourth quarter and throughout the year, we move swiftly in 2020 , one to our core capabilities to desktop metal.
We added Angelus for polymer technologies to our portfolio entering the health care and dental space in a major way.
We also consolidated our market share in metal binder jet into an undisputed leadership position.
Adding key technical capabilities to strengthen our competitive moat, while delivering industry leading growth across the business.
And just part production continues to be the fastest growing segment in additive and we're extremely well positioned to take share.
The overall industry and continue growing faster than our competitors.
We expect another outstanding year of growth in 2022, with a solid financial position strong secular tailwind and a world class go to market and technical talent.
We asked a lot of our teams in 2020 , one as the pandemic led to disruption and uncertainty.
As always Tim T M stepped up to these challenges and delivered tremendous results. Thank.
Thank you everyone a desktop metal for your hard work and tremendous contributions to our success.
With that let's open it up for questions.
Operator.
Thank you, ladies and gentlemen at this time well be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
Press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key please limit yourself to one question and one follow up so we may get to everyone's questions and then re queue for more questions.
Our first question comes from the line of Greg Palm with Craig Hallum. Please proceed with your question.
Yeah, Thanks, and good morning, everyone. Just just starting with the quarter I guess, if my math is right. It looks like the majority of upside was maybe driven by better contribution from X, one and maybe a little bit of upside from noncore revenue can you confirm that and then anything else that positively.
We're negatively surprised you relative to prior expectations.
Good morning, and thanks for the question.
Just for clarity sort of what we.
Put out for guidance.
Lee on excluding X one.
Was <unk> 92 to one O. Two so were right in the middle of that so.
So I would say, we did very well on our metal offerings.
X one was was definitely a contributor but that wasn't you know within our previous guidance.
Okay.
Fair enough and in can you confirm number one if there were any acquisitions that were made in the quarter and number two if you had any 10% plus customers in the quarter.
It's still like in terms of 10% customers you know, we evaluate that on a full year basis. If you will we did not have any that exceeded that that 10% threshold. If you will and I'm sorry. The first question was.
If you've made any acquisitions in the quarter.
So they were certainly X one had closed and we did too to dental labs that also closed in the early part of the quarter, but X one in the middle Middle of November was the last acquisition, we did for the year.
Yeah, I was I was sorry, I should clarify it I was thinking more on the dental website, okay I'll leave it there. Thanks.
Great.
Our next question comes from the line of Josh Sullivan with Debenture marks <unk> Company. Please proceed with your question.
Hey, good morning.
Good morning, it's done on the extra the expectation to exit 2020 through you know around breakeven can you just bucket. The major drivers there for US you know synergies investments growth, maybe if you know how many P. 50 systems do you expect to have in the wild by the I'm just looking for some metrics going into that assumption.
So we don't provide forecasts.
I would say, where we certainly expect a continued growth from 'twenty to 'twenty three.
Traditionally you know a vast majority of our revenue does come in the fourth fourth quarter of the year, but as Rick and I. Both highlighted in our prepared remarks, the key drivers for us over the next two years really a margin expansion.
We don't expect huh.
You know be introducing lots of new products into the market. It's really more focused on the products that we are now have launched and really driving margins.
Lee you know on the Opex side don't see a lot of additional spending I think that the rates you're seeing for Q4 here are really where we're going to try to hold firm as a company, but certainly we want to invest in R&D portfolio as well, so really where we're just going to start to get that that that lever.
If you will based on a much higher revenue number.
Number.
Got it.
Then just as far as you know the approach the desktop health in the dental industry and.
Vertical integration.
Yeah, how do you see or what do you see the need for non editor related kind of infrastructure within that as you grow in early stages I'm just trying to understand you know what's infrastructure to build out the industry versus direct additive type product sales in your overall strategy.
I think that in a good.
Richard a dental market most parts the majority of that $30 billion worth of parts will transition to an additive type process. This decade, almost all of it from.
From the polymer components that are used.
The indentures and.
The type of.
Yes.
The rest of the parts to ceramics and metal components all of them can be printed more efficiently.
In our patient specific environment.
So we see huge synergy and the ability to take a property. It would've had let's say 11 points EBITDA to something that's a double that plus a over a full transparent transformation period and the ability to eliminate double marginalization et cetera. So all of them are accretive.
It's a highly accretive play thank you.
And it's highly regeneron as well.
Our next question comes from the line of Martin Yang from Oppenheimer. Please proceed with your question.
Well good morning, Thank you for taking my question.
Our first question.
Our English attack in four Q and for the whole year distinguishing check grow.
Here in 2021 and was it bigger than exports contribution for the year.
Okay.
It definitely grew English they cut themselves with corporate related items in 2020 that it didn't happen in 'twenty. One so we're not on the actual core business of printers on Brexit.
It was definitely a growing business and we are positioning it for.
The dramatic growth in <unk>.
Over the next two years by I really shifting the product portfolio too.
More productive systems high performance systems and investing in the.
The material set that you can enable through there, particularly the FDA cleared dresses are like our permanent like zero Trust Mylan products like that overall it.
It was not larger.
The next one and in Q4, but it's a fantastic business that we're building on the part of Walmart space.
I think it's worth.
Again.
You know as we go forward I think we truly need to stop thinking about things the company by company.
Polymer metal and so forth I mean, we are truly integrating the teams across the board. So we have engineering resources that are you know shuffled around the salespeople go to market everything so I think especially as we enter 'twenty one 'twenty two it's going to be less meaningful than it has ever been.
Got it my next question is on your 2022 guidance is there any organic growth.
Growth embedded in the assumption and if so how much.
No the guidance, we're giving is for the business is constituted right now.
If we think acquired property in 2022.
We would we would change the guidance, but right now the guidance is for the business as is.
Thank you.
As a reminder, it is star one to ask a question. Our next question comes from the line of Troy Jensen with Lake Street Capital. Please proceed with your question.
Hey, gentlemen, congrats on the great results in a chip in the P 50.
Thank you Troy.
Hey, rich so how about just a focus on the P 50.
If memory serves me correct, a year and a half ago. When you guys first came out you talked about 84 reservations.
A machine or some number like that I'm just curious.
Could you give us an update on kind of where you are with backlog and visibility on the food safety and thoughts on how many more machines are going to stick with you.
Absolutely. So I think your number is isn't that correct range. We continue to make progress there we don't actually break down our products on a individual SKU basis, but we're making good progress and we're going to scale production. This year, we made a huge investment in the facility to triple or our ability to get machines.
Out.
And that facility is humming and are scaling up very nicely and we hope to a container a convergence and success in that part of it is definitely going to be a big important pillar of our long term growth.
And we have very high interest from our long customer list.
You'll be hearing more about it I see your progresses and with major corporations like like the example of Stanley Black <unk> Decker.
Our next question comes from the line of Martin Yang from Oppenheimer, which is a follow up. Please proceed with your question.
Hi, Thank you. So can you maybe talk about Stanley Black <unk> Decker how are they using 50 do you know.
The tool has been implemented for high volume production.
It is for high volume production actual end use parts.
And if you know you can make components with this technology at a much lower cost than the analog processes that exist today and this is going to allow you to switch your motor production instead of having one factory, that's something and then shifted to other parts of the world you'll be able to have a more localized production closer to the customer at a more cost effective.
Approach with inventory of one and eventually get.
The ability to customize for local markets.
So it is a fantastic case study and.
We just did this a couple of weeks ago or so you know I.
Expect him to do some more exciting pressed with them in the future as they get their things.
And Boeing production up and running.
Got it thank you Rick.
A little follow up if I may so can you maybe.
I'll provide an overview of your supply channel challenges is there any improvement or whether or not the improvement is embedded photo 2022 guidance, yeah, I think that that all of our guidance has the current landscape are built in.
I would say that there isn't a company in the U S. It hasn't had some level of supply chain challenges, we had some of ours in Q3, but I am proud of the work that our.
Our team did in Q4, despite a challenging environment they were able to get things done and you know.
Did affect our ability to ship Q4, I'm sorry, it should be 50 before the end of Q4, but you know a few weeks later.
The.
Middle of <unk>.
Yeah.
Q1, we were able to get that out and I think we're better positioned today to Blackstone than we were in Q3.
But you know, it's not a and.
And there's significant task I think that the whole world is going through I would have to say one one silver lining to this whole thing.
Yes.
This is what drives demand, we get calls from Ceos and senior people at major corporations are Smes because they can't.
Get.
[laughter] parts that they need they can't make progress in supply chain and additive is a big.
Part of that potential solution and it really allows you to modernize the way that you can make your products and simplify the way to make our products get around Paris. It's a it's a very flexible technology that is growing and you know we're proud of our growth it's not.
Not at all.
Right.
<unk> that we're focused on and you start mass production and at the same time, we're the fastest growing.
Company organically and Inorganically and added over the past year, we continue.
We will continue that effort this.
This year end.
We we make systems and are designing a product portfolio that is a winning portfolio, which has lowest cost per part for volume production with a variety of processes and metals ceramics polymers et cetera, So where we.
We are positioning the company for that.
For this decade I think it's.
It's exciting to see broad based demand being driven by supply chain disruption.
Our next question is a follow up question from the line of Greg Palm from Craig Hallum. Please proceed with your question.
Yeah. Thanks, Al if I missed the commentary apologies, but can you give us a little bit of the underlying assumptions within the guidance for fiscal 'twenty two on the revenue and I'm not sure. If the right way to think about it is you know contribution from X one contribution from core and.
From noncore, but that's essentially what I'm a I'm looking for if you can give us a little bit more color.
Let me take the first part, especially on I'll hand, it off to James I mean, I think we are taking this product portfolio, which is the original driver over the guidance and making some some moves we've taken our our metal products.
It's all direct one are now fully integrated into the D. M products. They gained new software and functionality that was developed by the average mix of Brooks more turnkey like our life Center technology.
And.
Same time, we have one operations team now we have one customer support team. We have one engineering team has been fully integrated.
We see very strong demand and in binder jetting on the products that we've got booked in metal and other components.
Huge opportunity to cross sell and up sell across this portfolio of customers went out 6000 customers.
With that or.
Part of this.
Whose family meal.
Our products.
We did acquire some some key assets last year and they're starting to bear fruit and we when we do our forecasting and our in our funnel we feel very good about the guidance that we're providing I think it's possible.
Possible to to.
Is this level of growth and we also see.
Very strong demand on the sand side for the applications that we're going after are in production of digital castings and components like that.
And the dental market. It has just a completely new refreshed portfolio with Einstein, which is a best in class highest price performance would.
The best materials portfolio for.
As Bart dental products and so that part is also seeing a great demand. So all of the oldest picture gives us that for the full view.
Uh huh.
What we're planning to do this year, our dental business on the parts side is growing organically. In addition to what we added to it that.
That was I would say starting initially in one initial region of the Midwest. Our I think our assumptions are proving right did that.
Highly accretive play.
And.
We're really happy with the results of it so that bad and maybe James has additional thoughts.
Yeah.
Not giving any additional texture on sort of the the company is if you will as I mentioned earlier.
Integrating more and more as Rick and I, both touched on one of the key initiatives for 'twenty, two as product rationalization as well I think what we can comfortably say metal is going to be a key driver for us for 2022 will be the biggest sort of pillar. If you will on our revenues, but we're not in a position to give any more.
Okay.
Texture beyond that.
Okay Fair enough I'll add my congratulations on getting the P 50 out I know that's a big event for the company in the industry. So congrats again on that.
Thank you, Greg and I'm very grateful for that thank you.
Our next question comes from the line of Noelle Dilts with Stifel. Please proceed with your question.
Yeah.
Hi, Thanks, and again congrats on the accomplishments this year.
So I I know James you said, you weren't going to add too much additional color on the businesses, but I was hoping that generally you could speak to the trends and how you're thinking about demand for <unk>.
Direct and indirect printers for Exelon as as you look at 'twenty 'twenty. Two you know specifically you know if there's any.
Sort of a kohl's or programs that you're undertaking on the indirect side as well thanks.
Absolutely look.
The indirect side is is a really interesting part of our business. We're the leader in that in that.
Out of the business and there's a large number of programs that have been.
Developing over over many years that are now starting to come to fruition we.
I feel really good about where we're taking.
On the indirect side of the business have upcoming products and capabilities that will be introduced throughout the year I'm Ah that that is a fantastic part of the business. It has synergies with <unk>.
Products like forest, because you'll now be able to do giant parts out of wood and all the components and we have very good business developing since the first quarter that we are watching it for the whole year, we did.
Several million dollars and enforce related equipment.
Equipment revenue, but.
A lot more than what we paid for the company. So we're very happy that we've gotten into that part of the business and on the direct side and the applications are broader in terms of there being a more horizontal utilization for products them because the parts can be used for many many many more applications.
Since then.
Casting the word parts. So we've got cool on our SME products like shop, that's quite strong and then we've integrated the excellent products now with our with our portfolio and then we've got the 50, we're really excited to start to get units out and it's been a long time and they're making it a best in class product.
With the.
Much hiring capabilities than what anybody else has in the market. So I'm very excited to get that the hands of customers. After all this work and I think 'twenty two is gonna be a thought that figure for this business.
I'm really excited about what we're putting together.
Okay. Thanks.
And then second it seems and you mentioned sort of some seasonality in that in the first quarter on when you're talking about margin, but also you know given the X one transaction I know sometimes that when you go through something let.
Let me just transaction like this it can kind of slow demand in the short term and then you know things started to accelerate it does that.
Is that happening and does that sort of enhance that seasonality further.
If you could comment on that that would be great. Thank you.
Yeah, No I think that's a very good point as well.
Well.
We look at the year in total I think traditionally in terms of the revenues for Q1, it tends to be in that 15% total revenues for the year I think certainly with these integration efforts.
Yeah.
You know, where we will likely be somewhere in that 15% to 20% neighborhood that said I think the pipeline is looking incredibly strong.
And you know, we do see lots of promising upside and you.
The second half of the year keeping in mind to the X. One so you know business was built around.
The order if you will.
We were really focused on is trying to shorten that timeline if you will.
We are expecting you know lots of potential in the second half.
Okay. Thank you very much.
Yeah.
Our next question a follow up question from Laurent of Troy Jensen with Lake Street Capital. Please proceed with your question.
Hey, guys.
I guess I just want to go back on one question on the P. 50, I know you guys have no capacity to make a lot of machines and get a lot of reservation, but because this can we think of it as a controlled rollout here for the first half very few machines upfront and before it's kind of a broader adoption or.
I mean, I wouldn't say and when they do have a follow up for James.
Absolutely look we it's a very good point I mean, it's a it's a complex system.
It's bigger than a minute.
I'm, a bus with lots of ancillary equipment and components a lot of custom parts. It's the fastest.
Production system ever built to make out of that part so yeah like all scale ups.
And manufacturing.
Can you.
Scale them up at a particular cadence in and we're not gonna have a wipe out a our goal is to do this in a thoughtful manner.
And.
Just like any other product they've got scale, but it was the model three or or or the products. You. You know you sold less ipos in the first year than you did on the 50 or so.
Oh, well the introduction, so I'm I'm very happy with the demand for our product and I'm very happy with the the.
The internal plans, but we're going to do it in a judicious way so that we get happy customers on the other side now this is a product that sold differently than our channel based approach. It is sold through our production team. We have a go to market team Dallas 70 people at the 70 people are in our go to market team, which is France.
Tastic and we've now integrated.
The leadership of that team. So that's complete by by making the right choices between the expertise of the folks that we had at cross across the board and I'm really excited about the progress that we're seeing are there on the on the production whereby basically our production sales team that.
Yeah, So like P 50, or very high volume production applications, we've got a strategic accounts team that looks at it.
Scale applications in multi year quarterly driven there like multi year, a very large application driven and then we have our channel, which we've expanded over the past year. We went from Oh about 90 partners at the beginning of the year to well over 200 and a it's a refreshed young channel that's very hungry and.
We've got a great leadership across the board on this and this groups and we're very excited about that.
That's M followed were building or for this year.
And if I could just get a follow up in for James here, absolutely because I saw a three 311 million share count number in your press release, I guess I'm trying to figure out is that fully diluted GAAP profitable kind of the all in share count number it would be it would be helpful. Yes.
So that would be all in on share count Troy.
<unk>.
We wouldn't expect.
Much of the way of changes from those numbers, except you know any sort of option exercises.
He is investing and so forth so that.
The all in number.
There are no further questions in the queue.
The call back to management for closing remarks.
Thank you.
Okay.
I want to thank everybody.
Joining the call as well as everybody that works at the M for their continued dedication passion and advancing our vision of A&P point now for mass production.
This is a great mission.
And it's an honor to work together with all of you.
And we really look forward to speaking again on the next call. Thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.