Q1 2022 Desktop Metal Inc Earnings Call

Good day and welcome to the Desktop Medal First Quarter 2022 Earnings Conference Call.

Good day and welcome to the desktop metals first quarter 2022 earnings conference call.

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I would now like to turn the conference over to Jay Gansko. Please go ahead.

I would now like to turn the conference over to Jake Ensco. Please go ahead.

Good morning, and thank you for joining us as we discuss first quarter 2022 financial results for Desktop Metal. With me today are Rick Fulop, Founder and CEO , and James Haley, CFO .

Good morning, and thank you for joining us as we discuss first quarter 2020 to financial results for desktop metal with me today are Rick <unk>, founder and CEO and James Daley CFO .

Please note that our financial results press release and presentation slides referred to on this call are available under the events and presentation section of our investor relations website.

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 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.

This call is also being webcast live with a link at the same 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 our Safe Harbor disclaimer on slide two of the presentation. Today's call will include forward-looking statements. These forward-looking statements reflect Desktop Metal's views and expectations only as of today, May 10, 2022, and actual results may vary materially based on a number of risks and uncertainties.

Before we begin 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. These forward looking statements reflect desktop metals views and expectations only as of today May 10, 2022, and actual results may vary materially based on a number of risks and uncertainties.

For more information about the risks that may impact Desktop Metals business and financial results, please refer to the risk factors section of the annual report on Form 10-K , in addition to the company's other filings with the SEC. We assume no obligation to update the forward-looking statement.

For more information about the risks that may impact desktop metals business and financial results. Please refer to the risk factors section of the annual report on Form 10-K. In addition to the company's other filings with the FCC, we assume no obligation to update the forward looking statements.

Additionally, during this presentation and the following Q&A session, we may refer to our results on a non-GAAP basis. non-GAAP 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.

Additionally, during this presentation and the following Q&A session. We may refer to our results on a non-GAAP basis non-GAAP measures are intended to supplement but not substitute for performance measures calculated in accordance with GAAP are financial results release contains the financial and other quantitative information to be discussed today as well as the <unk>.

Conciliation of the GAAP to non-GAAP measures.

With that, it's my pleasure to turn the call over to Rick Holt, founder and CEO of Desktop Metal.

With that it's my pleasure to turn the call over to Rick for founder and CEO of desktop metal.

Thank you, Jay. Hi, everyone. We're very excited to host you for Desktop Metal's first quarter 2022 financial results call. Today, I'll start with highlights of our quarterly financials, review a few exciting developments in the business to start the year, and spotlight some of the recent customer wins.

Thank you Jay Hi, everyone. We're very excited to host you for desktop metals first quarter 2022 financial results call today I'll start with highlights of our quarterly financials review a few exciting developments in the business to start the year and spotlights time over the recent customer wins.

I will then turn over the call to James to provide further color on the financial results of the quarter before closing with an update on our progress towards our key strategic priorities for 2022. We'll then open the call for Q&A.

I will then turn over the call to James to provide further color on the financial results for the quarter before closing with an update on our progress towards our key strategic priorities for 2022 well then open the call for Q&A.

I'll begin on slide three with a financial results summary. Overall, I'm pleased with the first quarter's performance as we experienced another quarter of exciting demand, resulting in top-line growth.

I'll begin on slide three with our financial results summary, overall I'm pleased with the first quarter's performance as we experienced another quarter of exciting demand, resulting in top line growth.

The consolidated revenue for the first quarter 2022 was $43.7 million, representing a strong year-over-year growth of 286%.

Consolidated revenue for the first part of 2022 was $43 7 million, representing a strong year over year growth of 286%.

This was driven by a combination of broad-based organic growth, including shipments of new products, as well as contributions from acquisitions.

This was driven by a combination of broad based organic growth, including shipments of new products as well as contributions from acquisitions were really excited about the quality of the product portfolio that we've put together and the opportunity to drive consistent long term growth.

We're really excited about the quality of the product portfolio that we've put together and the opportunity to drive consistent long-term growth.

non-GAAP gross margins were 17, 1% for the first quarter 2022 versus five 5% in the first quarter 'twenty 'twenty. One. This is an increase of over 1100, and 50 basis points year over year.

non-GAAP gross margins were 17.1% for the first quarter of 2022 versus 5.5% in the first quarter 2021. This is an increase of over 1150 basis points year-over-year. While this does represent a decline from the

While this does represent a decline from the fourth quarter of 'twenty one.

Q1 is usually the lowest revenue contributing quarter for our business, and so overhead absorption is the key factor pulling down our margin.

Do you want it seasonally the lowest revenue contributing quarter for our business and so overhead absorption is a key factor pulling down our margin structure.

As we continue to grow revenue throughout 2022, we expect a meaningful expansion in gross margins compared to this quarter. And we anticipate a full year 2022 non-gap gross margin to expand versus 2021, and it will exceed 30%.

We continue to grow revenue throughout 2022 we expect a meaningful expansion in gross margins compare to this quarter and we anticipate a full year 2022 non-GAAP gross margin to expand versus 'twenty, 'twenty, one and it will exceed 30%.

It's been a strong start to the year and demand remains robust across all our full portfolio of AM technologies and solutions. Therefore, we're reaffirming 2022 revenue expectations of approximately $260 million representing 131% growth over 2021. We're also reaffirming adjusted EBITDA expectations of approximately negative $90 million while maintaining our commitment to exit the calendar year 2023 breakeven on an adjusted EBITDA basis.

It's been a strong start to the year and demand remains robust across our all our full portfolio of AMT technologies and solutions. Therefore, we're reaffirming 2022 revenue expectations of approximately $260 million, representing 131% growth over 2021.

We're also reaffirming adjusted EBITDAX vacations of approximately negative 90 million, while maintaining our commitment to exit the calendar year 'twenty twenty-three breakeven on an adjusted EBITDA basis.

I'd like to take a moment to reflect on the significant progress we've made since going public and where we're today.

I'd like to take a moment to reflect the significant progress we've made since going public and where were today over.

Over the past 18 months, our team has worked diligently to develop and bring to market a range of AM2.0 metal platforms, which includes our flagship production system P50.

Over the past 18 months, our team has worked diligently to develop and bring to market a range of a M. Two point no metal platforms, which includes our flagship production system P. 50 attitude that we utilized our strong balance sheet to acquire a wide breadth of capabilities and technologies that greatly broadened our aim to point out portfolio and now provide us with a sustainable technologies.

Added to that, we utilized our strong balance sheet to acquire a wide breadth of capabilities and technologies that greatly broaden our AM 2.0 portfolio and now provide us with a sustainable technology differentiation across a range of applications.

She Asian across a range of applications as a result of that is purposeful strategic efforts. We believe we have built the undisputed leading portfolio of pure play a M to porno solutions today, we have 20 market, leading print platforms with a focus on high volume production of end use parts.

As a result of this purposeful strategic efforts, we believe we have built the undisputed leading portfolio of pure play AM 2.0 solutions.

Today, we have 20 market-leading print platforms with a focus on high-volume production of end-use parts.

Our platforms support a compelling portfolio of diverse materials, including metals, polymers, composites, sands, woods, and elastomers, amongst many others. These materials we have added help us address a growing array of end-use applications and have increased our presence in key verticals adopting additives such as dental, healthcare, foundries, and automotive, to name a few.

Our platform support a compelling portfolio of diverse materials, including metals polymers <unk> composites Sands woods in Alaska amongst amongst many others. These materials. We have added helped us address a growing array of end use applications and have increased our prices in key verticals adopting additive such as dental health care foundries.

In automotive to name a few.

As we look at Desktop Metal's roadmap over the next few years, we've established a foundation on top of which we can continue to rapidly scale as we're currently demonstrating. Importantly,

As we look at desktop metals roadmap over the next few years, we've established a foundation on top of which we can continue to rapidly scale as we're currently demonstrating.

Importantly.

We're also now well diversified and able to capitalize on growth drivers across many industries, accelerating the adoption of additive manufacturing.

We're also now well diversified unable to capitalize on growth drivers across many industries is accelerating the adoption of additive manufacturing is.

It sets durability to our trajectory and will enable us to grow across industry cycles with better predictability and precision.

Is that durability to our trajectory and will enable us to grow across industry cycles with better predictability and precision.

We're starting to see our vision come together to be the dominant player in AM for mass production as we progress towards our goal to capture a double digit share of the over $100 billion added manufacturing market by the end of the decade.

We're starting to see our vision come together to be the dominant player in a M for mass production as we progressed towards our goal to capture a double digit chair of the over $100 billion added manufacturing market by the end of the decade.

Moving down to a few business highlights, I'm very proud of what the team accomplished to kick off 2022. We made solid progress in our production system platform as we continue to grow our installed base of customers, leveraging our pan-pending, single-pass genic technology.

Moving down to a few business highlights I'm very proud of what the team accomplished to kick off 2022, we made solid progress in our production system platform as we continue to grow our installed base of customers leveraging our patent pending single passenger any technology.

This differentiated technology sets us apart in the industry in terms of speed and part cost, and the customer response has been fantastic.

This differentiated technology sets us apart in the industry in terms of speed and part cost and the customer response has been fantastic in the first quarter. We commenced shipments of the production system P 50, with our partner Stanley Black <unk> Decker and we can now report that we have production system P. One hardware install in China as a step towards our goal of establishing and developing hyperscale obligations.

In the first quarter, we commenced shipments of the production system P50 with our partners Stanley Black & Decker, and we can now report that we have production system P1 hardware installed in China as a step towards our goal of establishing and developing hyperscale applications.

We also have made excellent progress expanding our digital casting business, including the launch of our all new S-Max Flex.

We also have made excellent progress expanding our digital casting business, including the launch of our all new <unk> Flex Flex is a one of a kind digital casting printer, which for the first time makes it affordable for any foundry to get into digital casting.

Flex is a one-of-a-kind digital casting printer, which for the first time makes it affordable for any foundry to get into digital casting.

The initial response in order book for this solution has been extremely encouraging. I will provide more color on the opportunity here in the following slides.

The initial response in order book for this solution has been extremely encouraging I will provide more color on the opportunity here in the following slides.

Finally, the launch for our Einstein series of printers under Desktop Health is going extremely well and we're expanding production capacities for demand. These are high performance systems designed for precision dental and healthcare applications. And the differentiated features in the Einstein series and our leading portfolio of class two FDA cleared dental materials are driving increased demand in the market. We're very happy with how this business is shaping up with terrific potential for growth in the balance of 2022.

Finally, the launch of our Einstein series of printers under desktop house is going extremely well and we're expanding production capacity to support demand.

These are high performance systems designed for precision dental and health care applications and the differentiated features in the Einstein's theories and our leading portfolio of class II FDA cleared dental materials are driving increased demand in the market.

We're very happy with how this fits in shaping up with terrific potential for growth through the balance of 'twenty to 'twenty two.

Turning to slide 4, one of the biggest opportunities in front of us is the extraordinary benefits of additive manufacturing and what it brings to the supply chain.

Turning to slide four one of the biggest opportunities in front of US is the extraordinary benefits of additive manufacturing and what it brings to the supply chain.

These benefits have long been associated with additive manufacturing and have now become more top of mind than ever as a result of COVID and the resulting disruptions across the global supply chain and logistic networks. But supply chain challenges cannot be solved through rapid prototyping. You need high volume 3D printing capabilities in order to effectively and sustainably provide alternatives to conventional manufacturing. Desktop Metal is a.

These benefits have long been associated with additive manufacturing and have now become more top of mind than ever as a result of COVID-19 and the resulting disruption across the global supply chain and logistic networks.

Supply chain challenges cannot be solved through rapid prototyping, you need high volume three D printing capabilities in order to effectively and sustainably provide alternatives to conventional manufacturing.

Desktop metal as a pure play on supply chain disruption.

Our unique mass production capabilities unlock the ability to drive flexibility in global supply chains in a cost-effective way, including decentralized borderless production, on-demand inventory resiliency, on-shoring, and localized production, and the ability to reduce dependencies on third-party suppliers.

Our unique mass production capabilities unlock the ability to drive flexibility and global supply chain in a cost effective way, including decentralized boarder less production on demand inventory resiliency onshoring and localized production and the ability to reduce dependency on third party suppliers.

We've seen a number of recent customer wins here where supply chain challenges are driving demand and purchase efficiency.

We've seen a number of recent customer wins here, where supply chain challenges are driving demand and purchase decisions. We have customers ranging from major manufacturers have electrical parts looking to print those components in the U S companies experiencing significant business disruption in overseas foundries, where we're helping those manufacturers restart production of those parts.

We have customers ranging from major manufacturers of electrical parts looking to print those components in the U.S., companies experiencing significant business disruption in overseas foundries, where we're helping those manufacturers restore production of those parts to the U.S. through digital casting. And as President Biden indicated last Friday, as part of his new A.M. Forward initiative.

The U S through digital casting.

President Biden indicated last Friday as part of his new a important initiative.

US-based 3D printing enables cost-effective production in our country.

U S based three D printing enables cost effective production in our country.

Our hydro business has seen a significant uptick in orders for the 3D printed hydraulic components, as well as customers looking for alternatives to the current supplier network due to challenges and delays. And finally, our desktop platform is expanding its capacity, as many U.S. dental practices are looking to improve turnaround times and reduce cost amid disruptions to their traditional model of working with international parts suppliers, which are now facing steep supply chains and logistic network issues.

Our agribusiness has seen a significant uptick in orders for the three D printed hydraulic components as well as customers looking for alternatives to their current supplier network due to challenges and delays and finally, our desktop platform is expanding its capacity as many U S. Dental practices are looking to improve turnaround times and reduce cost of disruptions to their traditional model of working with international parts.

Suppliers, which are now facing steep supply chain and logistics network issues.

In each case, and around the world, our AM2.0 solutions are enabling companies to sidestep supply chain issues, improve environmental footprint of their products, and offer a path to flexible volume production through additive manufacturing.

In each case and around the world are aimed to point our solutions are enabling companies to sidestep supply chain issues improve environmental footprint of their products and offer a path through flexible volume production through additive manufacturing.

Even the Department of Defense recently awarded us a major award through their Defense Logistics Agency to address this issue.

Even the department of Defense recently awarded US a major award through the Defense Logistic agency to address these issues.

On the following slide, I'd like to briefly highlight one of our new print platforms offered under our Exxon brand.

On the following slide I'd like to briefly highlight one of our new print platforms offered under our excellent brand.

The S-Max Flex is a scalable, large-format binder jetting system for 3D-printed sand molds and cores. The S-Max Flex democratizes access of digital casting to foundries around the world, bringing them numerous benefits of AM2.0. Foundries can use digital casting solutions to quickly cast complex metal designs for markets such as aerospace, automotive, energy, among others.

The S. Max Lax is a scalable large format binder jetting system for three D printed sand molds and cores.

Flex Democratizes axis of digital casting to foundries around the world bring them numerous benefits of a M to point out.

Foundries can use digital casting solutions to quickly gas complex metal designs for markets, such as aerospace automotive energy among others.

This innovative system is a result of integration efforts from our X1 acquisition last year. The S-Max Flex combines X1's market-leading sand printing expertise in process and materials with desktop metals, single-pass jetting technology in an affordable architecture to deliver value to foundries that have long awaited an S-Max Pro, but found a premium price out of reach.

This innovative system is a result of integration efforts from our X one acquisition like last year.

<unk> combines X one is market, leading sand printing expertise in process and materials with desktop metals single passenger adding technology in an affordable architecture to deliver value to foundries that have long awaited an S. Max broke but found the premium priced out of reach.

This new solution leverages industrial robotics to bring a new level of affordability, reliability, and productivity to large format binder jetting.

This new solution Leverages industrial robotics to bring a new level of affordability reliability and productivity to large format binder jetting.

offering a larger and more scalable build volume with improved tolerances and higher speed.

Offering a larger and more scalable build volume with improved tolerances and higher speeds.

It's rare that you go from a product launch and customers are signing contracts for equipment on the spot. We have a growing order book for the S-Max Flex. This is the view at CastExpo in April . And we're also expanding production of this new product to meet demand.

It's rare that you'll go from a product launch and customers are signing contracts for equipment on the spot.

We have a growing order book for the S. Max Black since its debut at cast Expo in April and we're also expanding production of this new product to meet demand.

I wouldn't be surprised if the Flex becomes the world's best-selling digital casting printer by the year end.

I wouldn't be surprised if the effect becomes the world's best selling digital casting printer by the year end.

We're extremely excited about the opportunity for this class of system with this new level of affordability. This technology is applicable to over 40,000 foundries globally, turning it into another growth driver for the company.

We're extremely excited about the opportunity for this class of system with this new level of affordability. This technology is applicable to over 40000 foundries globally, turning it into another growth driver for the company.

Turning to slide six, we have a fantastic quarter of customer adoption across our brands, adding lots of new accounts, as well as expanding within our existing customer base. We continue to see progress with Marquis customers, an example of which are displayed on the left side of the slide, including Rolls-Royce, Microsoft, Schlumberger, and Colin Saros.

Turning to slide six we had a fantastic quarter of customer adoption across our brands, adding lots of new accounts as well as expanding within our existing customer base. We continue to see progress with marquee customers. An example of which are displayed on the left side of the slide including Rolls Royce, Microsoft Schlumberger and Collins aerospace on the.

On the right side, I want to highlight one of the customers, a really outstanding SME company called PrinterPress. They have been using our shop system as well as other products like our P1s for e-tech printers to combine benefits of metal 3D printing with their proprietary nanotechnology coatings to address the needs of medical device markets, including spinal and orthopedic medical devices.

The right side I want to highlight one of the customers are really outstanding SME company called printer press that'd been using our shop system as well as other products like our P ones or E Tech printers to combined benefits of metal three D printing with their proprietary nanotechnology coatings to address the needs of medical device market, including spine.

All in orthopedic medical devices the.

The shop system's binder jetting technology enables printer press to meet their customer demands for high volume of printed instruments while maintaining superior part quality and surface finish required for medical parts.

The shop systems Binder Jetting technology enables sprinter breast you meet their customer demands for high volume of printed instruments, while maintaining superior part quality and surface finish required for medical parts.

Customer demand was spectacular to start the year, and we remain confident in our ability to expand our market share across the board as we see companies of all sizes in many different end markets embracing the benefits of added manufacturing 2.0.

Customer demand was spectacular to start the year and we remain confident in our ability to expand our market share across the board as we see companies of all sizes in many different end markets embracing the benefits of additive manufacturing to point out.

I will now turn the call over to James, our CFO , to cover some financial highlights. James?

I will now turn the call over to James our CFO to cover some financial highlights James.

Thanks, Rick. Beginning on slide 8, you will see highlights of our financial performance for the first quarter of 2022. Please note, we will be referring to several financial metrics on a non-GAAP basis.

Thanks, Rick beginning on slide eight you will see highlights of our financial performance for the first quarter of 2022. Please note we will be referring to several financial metrics on a non-GAAP basis reconciliation to GAAP data is included in the filed appendix consolidated revenue for the quarter was $43.

Reconciliation to gap data is included in the filed appendix. Consolidated revenue for the quarter was $43.7 million of 286% year-over-year from $11.3 million in the first quarter of 2021. In addition to contributions from acquisitions, we saw modest growth across our portfolio of AM technologies and particularly in our metal and dental offerings.

$7 million of 286% year over year from $11.3 million in the first quarter of 2020. One in addition to contributions from acquisitions, we saw modest growth across our portfolio of M technologies, and particularly in our metal and dental offerings.

This was offset by slightly weaker than anticipated performance from photopolymer solutions as we revamped our portfolio in Q1 with the launch of the Einstein series and began commercial shipments. But the broad demand we're seeing across the portfolio, and in particular recently launched products, we're ramping this year, such as the Einstein series, S-Max, Flex, and Xtreme 8K. We're confident at the growth potential of the business across the balance of 2022.

This was offset by slightly weaker than anticipated performance from photo polymer solutions as we revamped our portfolio in Q1, the launch of the Einstein's theories and began commercial shipments, but the broad demand, we're seeing across the portfolio and in particular, our recently launched products were ramping this year such as.

As the Einstein serious S. Max Blacks and extreme 8-K, we're confident at the growth potential of the business across the balance of 2022.

Non-gap gross margin increased over 1,150 basis points year over year to 17.1 percent from 5.5 percent in the first quarter of 2021.

non-GAAP gross margin increased over 1150 basis points year over year to 17, 1% from five 5% in the first quarter of 2020 one.

While we expect gross margin to come down sequentially as a result of seasonally lower Q1 revenues and additional overhead from acquisitions, we did underperform relative to our internal forecast due to several factors, including a lower margin mix, increased one-time costs related to product launches for the production system P50 and Einstein series, and impacts from continued global supply chain and logistics disruptions.

While we expect gross margin to come down sequentially as a result of seasonally lower Q1 revenues and additional overhead from acquisitions, we did underperform relative to our internal forecast due to several factors, including a lower margin mix increased one time costs related to product launches.

Is that the production system P 50, and Einstein theories and impacts from continued global supply chain and logistics disruptions.

most notably higher than anticipated freight expenses.

Most notably higher than anticipated freight expenses.

Looking ahead to the balance of 2022, there are a number of factors that give us confidence on our expectation of meaningful gross margin expansion for the year, including higher expected sales volumes, resulting in improved overhead absorption, a more favorable product mix, and recent product launches scaling into more mature margin profiles.

Looking ahead to the balance of 'twenty or 'twenty. Two there were a number of factors that give us confidence R&R expectation of meaningful gross margin expansion for the year, including higher expected sales volumes, resulting in improved overhead absorption a more favorable product mix and recent product launches scaling into.

Two more mature margin profiles. In addition, we expect pricing updates on certain products made towards the end of Q1, we will have more of an effect as we progress into Q2 and the back half of the year. As a result, we anticipate continued gross margin expansion in 2022 on an annual basis versus 2021.

In addition, we expect pricing updates on certain products made towards the end of Q1 will have more of an effect as we progress into Q2 in the back half of the year. As a result, we anticipate continued gross margin expansion in 2022 on an annual basis versus 2021.

with non-GAAP gross margins exceeding 30% for the full year of 2022. On the next slide, non-GAAP operating expenses were $52.1 million for the first quarter of 2022, representing 119% as a percentage of revenue versus 193% in the first quarter of 2021.

With non-GAAP gross margins exceeding 30% for the full year of 2022.

On the next lag non-GAAP operating expenses were $52 $1 million for the first quarter 2022, representing a 119% as a percentage of revenue versus 193% in the first quarter of 2020 one.

In the quarter, operating expenses were higher than planned due to one-time professional fees and costs associated with Q1 product launches of the production system P50 and Einstein series.

In the quarter operating expenses were higher than planned due to onetime professional fees and costs associated with Q1 product launches of the production system P 50, and Einstein theories overall, we continue to see operating expenses moderate with ongoing efforts to optimize our expense structure across the company.

Overall, we continue to see operating expenses moderate with ongoing efforts to optimize our expense structure across the company. We're also executing on previously discussed initiatives to reduce expenses, including rationalizing the product portfolio, driving efficiencies in manufacturing, supply chain, and logistics, and consolidating our global facilities footprint.

We're also executing on our previously discussed initiatives to reduce expenses include and rationalizing the product portfolio driving efficiencies in manufacturing supply chain and logistics and consolidate in our global facilities footprint.

and we are focused on driving cost synergies across the portfolio of companies we have acquired through the balance of the year. We are in the early stages of these initiatives and expect continued focus and execution to have a durable impact on our expense structure. In combination with continued revenue growth, this plan will drive operating leverage and improved margins throughout the balance of 2022 and beyond.

And we are focused on driving cost synergies across the portfolio of companies.

Acquired through the balance of the year.

We are in the early stages of these initiatives and expect continued focus and execution to have a durable impact on our expense structure in combination with continued revenue growth. This plan will drive operating leverage and improve margins throughout the balance of 2022 and beyond.

Adjusted EBITDA for the first quarter of 2022 was negative $41.6 million. Adjusted EBITDA did underperform relative to our internal forecast, driven primarily by the factors that impacted gross margins, including seasonally lower Q1 sales volumes, product mix and one-time product launch expenses, as well as higher than expected operating

Adjusted EBITDA for the first quarter of 2022 was negative $41.6 million adjusted EBITDA did underperform relative to our internal forecast driven primarily by the factors that impacted gross margins, including seasonally lower Q1 sales volumes product mix and one time product launch expenses.

As well as higher than expected operating expenses.

We remain focused on their previously detailed strategic initiatives to optimize operating expenses and awarded to meet our commitment on adjusted EBITDA and achieve our path to profitability.

We remain focused on the previously detailed strategic initiatives to optimize operating expenses in order to meet our commitment on adjusted EBITDA and achieve our path to profitability.

As we make progress on these initiatives, as well as continue revenue growth through the balance of 2022, we expect to realize improved absorption and operating leverage, which will lead to significant improvement in adjusted EBITDA through the end of the year.

As we make progress on these initiatives as well as continued revenue growth through the balance of 'twenty 'twenty. Two we expect to realize improved absorption on operating leverage which will lead to significant improvement in adjusted EBITDA through the end of the year.

We ended the quarter with $206.5 million in cash, cash equivalents, and short-term investments as of March 31st, 2022. We also made proposal efforts to raise our inventory balance in the first quarter of 2022, which came in at $81.9 million, up from $65.4 million in the fourth quarter of 2021.

We ended the quarter with $206 $5 million in cash cash equivalents and short term investments as of March 31, 2022. We also made purposeful efforts to raise our inventory balance in the first quarter of 2022 which came in at $81 9 million up from $65 4 million in the fourth.

For 2021, we were proactive in managing inventory levels to mitigate potential ongoing supply chain risk and ensure we have enough products to meet our quarterly targets.

We were proactive in managing inventory levels to mitigate potential ongoing supply chain risk and ensure we have enough products to meet our quarterly target.

And finally, moving to guidance, as Rick detailed, with strong first quarter revenue contributions and robust demand across our portfolio, we are reaffirming our revenue expectations of approximately $260 million for the full year 2022, which represents 131% year-over-year growth.

And finally moving to guidance as Rick detailed with strong first quarter revenue contributions and robust demand across our portfolio. We are reaffirming our revenue expectations of approximately $260 million for the full year 2022, which represents a 131% year over year growth. We also can.

We also continue to expect adjusted EBITDA of approximately negative $90 million as we anticipate a combination of increased revenue, improved gross margins, operating expense moderation, and operating leverage to drive significant improvements in adjusted EBITDA throughout the balance of 2022. With that, I will turn the call back over.

We expect adjusted EBITDA of approximately negative $90 million as we anticipate a combination of increased revenue improved gross margins operating expense moderation and the operating leverage to drive significant improvements in adjusted EBITDA throughout the balance of 2020 two with that I will turn the call.

Back over to Rick.

Thank you, James. I'll wrap up on slide 11. We remain focused on our strategic priorities for 2022 and driving the business to meet these commitments. Revenue was strong in the first quarter as we continue to grow the business at scale. We gain continuous market penetration and key verticals with outsized durable growth opportunities, specifically automotive, consumer electronics, dental, and health.

Thank you James I'll wrap up on slide 11.

We remain focused on our strategic priorities for 2022 and driving the business to meet those commitments revenue was strong in the first quarter as we continue to grow the business at scale, we gained continuous market penetration in key verticals with outsized turbo growth opportunities, specifically automotive consumer electronics dental and health care.

With respect to Hyperscale accounts, we're engaged with several key players that we believe represent a large opportunity for our business and can deliver significant growth. And we made important technical and commercial strides with those accounts in the first quarter. The one area where we fell short is expense spend in the quarter. We're making an effort between now and the end of the year to contain costs and gain cost synergies from the acquisitions we made last year. It's very important for us to make progress in our path to profitability, as you saw in the previous slide from James.

With respect to the Hyperscale accounts, we're engaged with several key players that we believe represents a large opportunity for our business and can deliver significant growth and we made important technical and commercial strides with those accounts and in the first quarter.

The one area, where we fell short is expense spend in the quarter were making an effort between now and the end of the year to contain cost and gain cost synergies from the acquisitions. We made last year, it's very important for us to make progress on our path to profitability as you saw on the previous slide from James as a percentage of revenue expenses are decreasing demonstrating the operating leverage in the business and you'll continue to see.

As a percentage of revenue, expenses are decreasing, demonstrating the operating leverage in the business. And you'll continue to see that through the rest of the year as growing revenues are paired with several proactive efforts to reduce expenses and the improvement to our gross margins take effect.

That through the rest of the year is growing revenues are paired with several proactive efforts to reduce expenses and the improvement to our gross margins take effect.

We remain committed to reaching adjusted EBITDA breakeven by the end of 2023 and are confident in our path to get there.

We remain committed to reaching adjusted EBITDA breakeven by the end of 'twenty 23, and are confident in our path to get there.

Managing our cash flow and working capital remains an important focus, and we expect to demonstrate progress throughout this year on specific initiatives of disciplined capital allocation, inventory management, and supply chain synergies. Overall, it was a great start to 2022. Revenue growth was at the top of our market, and we're confident with the demand we're seeing across a broad product portfolio to deliver top-line growth and margin expansion throughout the balance of 2022. With that, let's open it up for questions. Operator?

How did you go cash flow and working capital remains an important focus and we expect to demonstrate progress throughout this year on specific initiatives of disciplined capital allocation.

Inventory management and supply chain synergies.

Overall, it was a great start to 2022 revenue growth was at the top of our market and we're confident with the demand we're seeing across our broad product portfolio to deliver topline growth and margin expansion throughout the balance of 2022.

With that let's open it up 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 you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Again, in the interest of time, please limit yourselves to one question and one follow-up. At this time, we will pause momentarily to assemble the roster.

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 you are using a speakerphone. Please pick up your handset before pressing Keith.

In fact anytime you have a question has been that just and you would like to withdraw your question. Please press Star then two.

Again in the interest of time, please limit yourself to one question and one follow up at this time these little pause momentarily to assemble it out their roster.

Yeah.

The first question comes from Josh Sullivan with the Benchmark Company. Please go ahead.

The first question comes from Josh Sullivan with the Benchmark company. Please go ahead.

Good morning.

As far as the guidance for 2022, just given the Q1 results, can you just help us with the revenue cadence for the rest of the year? How should we think about the various product launches driving quarter-to-quarter growth?

Hey, John It's short it's.

As far as the guidance for 'twenty two just given the Q1 results can you just help us with the revenue cadence for the rest of the year, just how should we think about the various product launches driving quarter over quarter growth.

Yeah.

I think it's going to be similar to what we described in the previous quarter and.

I think it's going to be similar to what we described in the previous quarter.

it's ramping up that way. You launch a product and then you start to scale capacity after that. We had launch of Einstein in Q1, and now in Q2, we're making much more of that product as we go through a ramp. I don't know if this answers your question, but

It's ramping up that way.

We have you launch a product and then you start to scale capacity. After that we had launch of Einstein in Q1 and now.

Thank you too, where we're making much more of that product as we as we go through a ramp.

Uh huh.

Very good about the I don't know if this answers your question but.

So I think the other part, Josh, is we have talked about typically we see about 15% of the 15

So I think the other part Josh is that we had talked about typically we see about 15% of the 15.

percentage of the revenues in Q1, Q2, and Q3 tend to be in the low 20s. Q3 tends to be down given the European shutdown, if you will, slightly sequentially. And then the balance, the revenue will be in Q4. So a similar pattern.

Percentage.

The revenues in Q1, Q2, and Q3 tend to be in the low low twenty's Q3 tends to be down given that European shutdown. If you will slightly sequentially and then the balance of the revenue will be in Q4, so a similar pattern to what we saw last year as well.

Okay.

And then just as we think of the overhead absorption factor, you know, where are you going to have a finer edge on expenses? Do you feel you have the sales force and channels in place if you want for the long term? Just where does that discipline going to emanate from?

And then just as we think of the overhead absorption sector, you know where you're going to have a finer edge on expenses do you feel you have the sales force and channels in place do you want to have long term cause where where does that discipline.

Emanate from.

So, certainly, you know, as it relates to Q1, you know, quite a few factors working against this, the seasonality of it all, but also to your point on the mix, so both in terms of products and direct indirect sales channels.

So is it certainly.

As it relates to Q1.

Quite a few factors working against us the seasonality of it all.

But also to your point on the on the mix. So both in terms of products and indirect indirect sales channels.

where there are lower margins. So, we do see that balancing out over the course of the year. And margin will be improving dramatically as revenue scale. We did also have a number of, you know, one-time items as we're launching products. And again, sort of the global supply chain issues and the logistics expenses as we're trying to launch those products.

With lower margins. So we do see that balancing out over the course of course of the year and margin will be improving dramatically.

As revenues scale. We did also have a number of you know.

One time items.

We're launching products.

Again sort of the global supply chain issues and logistics expenses as weird channel trying to launch those products.

Thank you for your time.

The next question is from Greg Palm with Craig Hallam Capital Group. Please go ahead. Yeah. Good morning, everyone. Thanks.

The next question comes from Greg Palm with Craig Hallum Capital. Please go ahead.

Yeah. Good morning, everyone. Thanks for taking the questions here.

My pleasure.

So you mentioned the uptick in demand to support these on-shoring projects. I thought that was an interesting comment. Can you talk about maybe certain end markets or geographies that you're most excited about and which of your product lines do you think are best suited to capitalize on this, call it growing need?

So you mentioned the uptick in demand to support these onshore in projects. So I thought that was an interesting comment can you talk about you know maybe certain end markets or geographies that you're most excited about it and what's your product lines do you think are best suited to cat.

All eyes on this you know call it growing need.

It's pretty broad based, both in polymer and metal. We've got, and even in the healthcare side, on the dental side, and everything from

It's pretty broad based both in Palmer and metal.

Got it and even in the health care side on the dental side and everything from from.

people having difficulty sourcing components that are polymer down to folks that produce high-volume parts in different metal materials that basically would like to have more control of their supply chain and input costs. I think that's shaping up quite well. A lot of stuff in automotive and consumer electronics.

People are having difficulty sourcing components that are that are polymer down to folks that they produce high volume parts and in different metal materials that are basically we'd like to have more control over their supply chain and our input costs and I think that's shaping up quite well.

A lot of stuff in automotive and consumer electronics and it's across the board.

It's across the board on it. It's I would say one area where we're benefiting

It's a I would say one area, where we're benefiting.

Uh, we are definitely, you probably saw what President Biden announced last week.

We are definitely proposed so what president Biden announced last week and.

We think there's going to be significant benefit to our industry, specifically to companies focused on mass production via additive, which is really our core business where we're the leader, versus prototyping or tooling, which was sort of what people used to do with additive before. So there's a significant tailwind that we didn't have a year ago in this area, and I

We think there's going to be a significant benefit to our industry spin.

Specifically two companies focused on mass production yet.

Out of that which is really our core business, where we're the leader.

And.

You know versus prototyping or tooling, which was sort of what people used to do without any before so there's a a significant tailwind that we didn't have a year ago in this area and I think.

It's.

it's, you know, once you once you move supply chain from one place to another, you, you, I think that becomes a durable, a durable thing. So I think our sales folks are busy supporting those customers.

It's you know once you once you move supply chain from one place to run all of our U U Oh, I think it becomes a durable.

Durable thing so I think.

Our sales folks are busy supporting those customers.

Yeah, that's good. Makes sense. And then I guess, you know, just looking back on X1, it's been, I don't know, six months since the close. Can you talk a little bit more about the development of the SMAX FLEX and, you know, just kind of thinking more broadly in terms of synergies? What else are you sort of most excited about in terms of the kind of co-development of new projects, etc.?

Yeah. That's good makes sense and then I guess you know just looking back on X. One it's been I don't know six months since the close can you talk a little bit more about the development of the S. Max flax and you know just kind of thinking more broadly in terms of synergies.

What else do you sort of most excited about in terms of the kind of co development of new projects et cetera.

I mean, we're really excited about the fact that we're now Onyx One and it's a fantastic company. I think we've got combined some really good things in development. First one of which is this FMAX Flex, which makes it affordable for the first time for any foundry to be able to use this class of product, which before used to be quite expensive. There's over 40,000 foundries globally that can benefit from this. So it's definitely a very nice product. We've got

I mean, we're really excited about.

The fact that we're now.

Onyx, one and it's a fantastic company I think we've got combined some really good things in development first one of which is S. Max wax, which makes it affordable for the first time for any foundry to be able to uses classroom product, which before used to be quite expensive and there's over 40000 foundries globally that can benefit from it so.

It's definitely.

A very nice product, we've got a great demand in and that people have been buying them on the spot since we announced it. So we're really excited and happy about that product I would say that.

great demand and people have been buying them on the spot since we announced it. So we're really excited and happy about that product. I would say that we plan to.

We plan to.

over time continually make our products more integrated and continue to you know we've taken the revenue synergies for a lot of these transactions that we've done and I think over time we will especially in the second half of the year we'll take the cost synergies benefits of really becoming a more efficient organization as a whole.

Overtime until we make our products more integrated and continue to you know we've.

Taking the revenue synergies for a lot of these transactions that we've done and I think overtime, we will especially in the second half where you will take the cost synergies benefits are really becoming a more efficient organization as a whole.

But.

I'm very happy with the transaction so far. X1 benefits significantly from some of the software capabilities that DiEM has, which make these products on the metal side more turnkey and easier to install. We will continue to make our products best in class. We're the market share leader by any way that you slice the data on the bindage of a market. We plan to continue to grow our position in the market.

I'm very happy with the transaction, so far X one benefits significantly from someone's software capabilities that <unk> has which make these products when the metal side more turnkey and easier to install and we.

We will continue to make our.

Our products best in class, where the market share leader by any way that you slice the data on the.

Oh on the Binder jet market and we plan to continue to grow our position in the market.

Alright, I appreciate the color of his luck going forward. Thank you.

The next question comes from Martin Yang with Oppenheimer and Company. Please go ahead.

The next question comes from Martin Yang with Oppenheimer <unk> Company. Please go ahead.

Hey, Martin. Good morning. Thank you for taking my question, Rick. So, first question is around P50. Can you maybe give us an update on customer engagement activities and the pipeline, and if there's any early customer feedback? If you're comfortable, please share with us.

Hey, Martin.

Morning.

For taking my question Rick.

So first question is around PS 50 can you maybe give us an update on customer engagement activities in the pipeline.

If there's any early customer feedback.

It's a comfortable please share with us.

Yeah, I think we were very happy with that program and continue to see significant demand and we

Yeah, I think we were very happy with that program and continue to see a significant demand and we.

We.

We're going to be making announcements in the future as the year progresses and we make more. I don't know if every customer will let us talk about our program the way they did.

They're making announcements in the future as the year progresses, and we make a bit more I suppose I don't know if every customer let us talk about our program the way that.

Stanley has because you know, usually this goes to very large companies large companies tend to keep their plans confidential, but we'll definitely have systems in the field that that we'll be able to reference and I think we are you know that as you know p50 the game-changing product with incredible economics and

Stanley has because usually this goes to very large companies large companies tend to keep their plants are confidential, but we will definitely have a systems in the field that that we'll be able to reference and I think we are as you know the 50 is a game changing product with incredible economics and.

It allows you to really disrupt the market, but we're going to have a judicious rollout as it's a pretty large platform and scale it appropriately.

It allows you to really disrupt.

Disrupt the market, but we're going to have a judicious rollout is it's a pretty large platform and our scale it appropriately.

My follow-up question is regarding your inventory, is there any certain product you want to highlight that contributed to that increase in inventory?

Got it my follow up question is regarding your inventory.

Is there any certain product you want to highlight that contributed to that increase in inventory.

Well, I think that our strategy and inventory has been that we don't want to have a situation like we had in Q3 last year, where we were trying to...

Well I think that our strategy on inventory has been that that Oh, we don't want to have a situation like we had in Q3 last year, where we we were trying to.

things and ended up short of parts to be able to ship product before the end of the quarter. We have been trying to run our supply chain and our operations in a way that we're able to have the capacity to support the next quarter and ship the products that need to be shipped. I would say that it's...

Balance things and ended up short of parts to be able to ship product before the end of the quarter.

So we have been.

Trying to run our supply chain and our operations team in a way that we're able to have the capacity to support the next quarter in and ship the products that need to be shipped so I would say that.

It's you know.

you could have a just-in-time inventory or you can have a just-in-case inventory. And we're leaning more towards a just-in-case inventory to make sure that we can meet our revenue targets and market share targets.

You could have a just in time inventory or you can have a just in case inventory and we're leaning more towards adjusting case inventories to make sure that we can.

<unk> meet our revenue targets and market share targets and then you know.

And then, you know, it's for select products. So we're being judicious as we're executing it. But I think that it's the more prudent way to run a company in a very complex environment like today with lockdowns in China and inability for people to get parts. We're fortunate that we don't have a significant manufacturing exposure.

It's for select products, so we're being judicious as we were executing it but.

I think that it's the more prudent way to run a company in a very complex environment like today with Lockdowns in China, an inability for people to get parts. We're fortunate that we don't have a significant manufacturing exposure to China, we have our production.

to China, we have our production.

All of our machines are made outside of China, however, we may have suppliers that have components that are made there. So, we've been... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

Oh, you know all of our machines are made outside of outside of China. However, we may have suppliers that have components that are made there. So we've been.

pretty strategic about how we do our sourcing, having gotten bitten last Q3, so that we can make our revenue targets.

Really strategic about how we do our sourcing.

Having gotten bitten last Q3, so that we can make our revenue targets and so it is a.

We called it out because it is a proactive move on our part to be able to continue to make our numbers for the balance of the year. Martin, I would add to that roughly two-thirds of the increase in inventories is in finished goods as well. So again, to Rick's point about being able to satisfy the demand over the next quarter or two is key for us.

We called it out because it is a proactive move on our part to be able to continue to make our numbers for the balance of the year Martin I would add to that roughly two thirds of the.

The increase in inventories and finished goods as well so again, sorry to Rick's point.

Being able to satisfy the demand over the next quarter or two is key for us.

Got it thank you.

Yeah.

Yeah.

As a reminder, if you have a question, please press star then one to be joined into the queue. The next question comes from Troy Jensen with Lake Street Capital. Please go ahead.

As a reminder, if you have a question. Please press star then one can be joined into the queue.

The next question comes from Troy Jensen with Lake Street Capital. Please go ahead.

Question and congrats on the nice revenue results here.

Thank you Troy.

Hey, guys, so I guess I'd like to talk a little bit about a backlog entering Q2. Kind of a multi-part question here. I'm assuming there is a lot of business you couldn't ship, right, just because of supply chain constraints. But then also Shapeways had a statement in their 10-K that they placed like a $10 million order with you guys in Q1 and a $5 million order with you in Q2. So, curious whether you're a 10% customer in the quarter and what this kind of backlog would look like entering Q2.

Hey, guys. So I guess Hum I'd like to talk a little bit about our backlog entering Q2 kind of a multipart question here I am assuming there is a lot of business. He couldn't ship right just because of supply.

King constraints, but then also safeways had.

A statement in their 10-K that they place like a 10 million dollar order with you guys in Q1, and a $5 million order with you in Q2, so I'm curious where the 10% customer in the car in the quarter and what does it mean.

Backlog looks like in Q2.

Sure. So just for clarity, first off, Shapeways is a key customer of ours. We have a great relationship. We generally don't like to talk about any one individual customer, but I think the disclosure you're referring to, Troy, is that actually cash paid per Shapeways filings. In terms of Q1 revenue from Shapeways, it was minimal. It was under a million dollars.

Sure So just for.

Clarity first akshay.

A key customer of ours, we have a great relationship we generally don't like to talk.

Talk about any one individual.

But I think the disclosure were you referring to Troy is that actually cash cash aid.

Her shambling filings in terms of Q1 revenue from gateways. It was minimal it was it was under $1 million.

So, when you're reading their footnotes, if you look at language closely, I think they're

So when you are reading there they're affluent.

If you look at the language closely I think they're there.

their note is about what was actually paid. So oftentimes when you're paying for shipments that are in arrears.

It is about what was actually paid.

Often times when youre paying for shipments are.

In arrears.

But again, the relationship's great. We continue to have a lot of exciting, exciting business. So I would say building on what James has said on backlog, I think since Q3 last year, we've been in a situation where

But again the relationships great. We are we continue to have.

Have a lot of exciting exciting business or I would say building on what James has said on backlog.

There's Q3 last year, we've been in a situation where.

You are pushing yourselves force to hit numbers larger than your targets and usually its supply chain related.

you are pushing your sales force to hit numbers larger than your targets and usually supply chain related that hold you from getting another $5 to $10 million that quarter. I think that the benefit of that is that you end up going to the next quarter with some level of momentum that as you're building those components and finishing those products you then end up.

Hold you from.

Getting another $5 million to $10 million a quarter. So I think that that the benefit of that is that you end up going to the next quarter with some level of momentum that as you're building those components.

Finishing those products you then end up.

catching up, and then that rolls onto the next product. We've got definitely very significant backlog on X1. That's just how they run their business versus a forecast-driven business. Part of what we're trying to do over time is going to be to turn that into a forecast business. Also, we continue to have backlog on the Einstein products, which are selling extremely well, better than

Catching up and then that rolls onto the next product.

We've got a definitely very significant backlog on X. One that's just how they run their business versus our forecast driven business and part of what we're trying to do over time is gonna be to turn that into a build to forecast business also on we continue to have backlog on the Einstein products, which you're selling.

Greenlee, well or better than we.

We expect it and we're increasing capacity to support that demand. And then we also continue to have backlog on Xtreme 8K, but we're trying to close those gaps. And it just happens to be that those products are selling quite well.

We expected and we're increasing capacity to support that demand and then we also continue to have backlog on extra in 8-K, but we're trying to close those gaps and it just happens to be that those products are selling quite well.

Okay and then my follow up you know if we go back six seven years ago. The Obama administration had initiatives for additives.

Okay, and then my follow up, you know, if we go back six, seven years ago, the Obama administration had initiatives for added

I think, yeah, even 3D printing was part of his State of the Union address one year. You know, I don't know if we saw much great benefit from that. So, what's the Biden administration doing differently here with their initiatives and their other incentives or, you know, how can we kind of monitor that this is having an effect?

Yeah, even three D printing was part of it is a state of the Union address one here.

I don't know if we saw much benefit from that so what's the bite into administration doing differently here with their initiatives and other incentives are and how can we kind of monitor that this is having an effect.

Yeah, I think that those are great questions. I think that I mean, the the

Yeah, I think that those are great questions I think that.

I mean the the.

I don't want to speak for the administration, but I think, as you know, we're in a significant supply chain context that's very different today than it used to be, and I think they're looking at this as a solution to address some of the reshoring that needs to happen if you come back from China. If you look at the bipartisan innovation bill, there's significant...

I don't want to speak for the for the administration, but I think as you know with significant supply chain context, it's very different today than it used to be and I think they're looking at this as a solution to address some of the re shoring that needs to happen as we come back from China. If you look at the bipartisan innovation Bill there are significant.

line items dedicated to helping the industry do this, and different types of financing and other things that are gonna help SMEs, and there's commitments from defense contractors to adopt a greater percentage of goods made through SMEs.

Line items.

Dedicated to helping the industry do this and different types of financing and other things that are going to help Smes.

Commitments from defense contractors to adopt a greater percentage of AUM.

Goods made through modes of additive that are designed for production those traditionally tend to be metal or.

modes of additive that are designed for production. Those traditionally tend to be metal or, more recently, some advanced polymer components. As you know, it has been happening in aerospace and

More recently.

Some advanced polymer components, but it.

It is you know as you know it has been happening in aerospace in.

And the excellent space industry for some time and now it's permitting to a broader section of the economy, we as a leader in what we call aimed to know which is the ability to mass produce with additive cost effectively versus commercial manufacturing think will be a disproportionate beneficiary of some of these efforts and actually at <unk>.

But we're gonna be showcasing.

Over 300 production parts as examples of Oh things that you can do with additive.

This is very very much not prototyping, which is what we were doing back in the Obama days or tooling. This is really mass production of parts with additive.

Really and new applications. So I think I'm really excited to see what they do I mean, I think the governments.

Somebody that can help its not the end all be all solution for all our problems, but definitely I think they are trying to do something here with good intentions to help the country.

And we'll see if this bipartisan immigration bill.

Passes, which I think is going to help us solve not just additive issues, but also issues with semiconductor industry resiliency in the other segments that I think are critical to national security and and competitiveness of our four economies. So we'll see.

Okay, well good luck, Dave if I could sneak one more in Rick.

Just curious on the convertible announcement just done the convertible you guys announced today you know why now I guess would be my question. It seems like you guys did 260 million in revenue in this massive ramp at the end of the year and.

You know just hopefully sentiment would be better than two you know why why why now I guess is the question.

So Troy Unfortunately, because the securities law restrictions, we cannot comment on the offering.

Okay, Alright understood guys, Congrats and good luck.

Thank you.

The next question comes from Noelle Dilts with Stiefel. Please go ahead.

Hi, guys good morning.

Just on the Hyperscale customer in China.

Hoping you could kind of expand on.

What the basically what the pipeline looks like in terms of adding additional hyperscale customers. You know how you think he may be able to scale with the customer where you have the one machine installed if you could just expand on how youre thinking about that piece that would be great. Thank you.

Yeah, absolutely no we're actually working with all of them. So you will see our stuff in lots of products are in I think it's progressing at it's at.

At a pretty good clip considering the pace at which.

Some of these things need to move with with this class of companies.

I think youre going to see additive and in lots of auto and consumer electronic products in the future.

But just there's some confidential these companies don't want to.

We're probably at the most that we can say right now with the disclosures.

Okay got it.

And then same idea could you just expand a little bit on dental sort of what you're seeing on the lab side of things how youre thinking about you know just kind of the how to think about growth opportunities. This year and if it might accelerate into 'twenty into 2020 three.

You absolutely need to gain traction yeah, I mean, I couldn't be more excited about our market and then what's happening in dental because if if you know the Arab world has already adopted it in orthodontics for tooling for liners and all the products, but what we're talking about here is very different is really the.

Our restaurateur parts, which is a $30 billion segment and these are parts that are permanently in your mouth. Once you. After you go to the dentist. So it's a new area for dental for printing, it's putting something that stays in there for a very long time and.

These are FDA class two products, which are more regulatory barriers and her are much more sophisticated from a chemistry and technology point of view and the throughput required to make the numbers work and so we are super Super excited about that segment our views with all 30 billion segment I'm going to turn this decade.

And by the end of decade will be fully made with additive we've got an incredible platform with best in class products in it.

And is growing faster than we can make the products and we are developing lots of new obligations in.

In that space, we have several materials launches.

Over the next year or products like Sarah is doing extremely well and has best in class properties three times the <unk>.

Fracture resistant of previous generation products has got half the moisture resistance has got a dramatically better.

<unk> resistance and.

The customers love it so it looks the products look very very good.

In your mouth so.

It's a it's a segment that we.

We are excited to be part of and continue to see significant growth.

For the foreseeable future and.

We are <unk>.

Excited to have our 1000, plus labs that use our technology.

And that's the Delta dental practices that we sell.

Parts of all of the all the components to partner.

Partner with them to move the industry forward.

Great. Thank you.

Uh huh.

The next question for John .

Josh Sullivan with the benchmark company. Please go ahead.

Yeah, just on the Defense Logistics award can you provide any specifics there the size duration.

Where it potentially could go long term.

Not yet, but we will provide it.

In the future.

It's we're excited this is going to enable.

Our government to do to have more flexibility.

By having printing.

In primarily metal metal components.

Okay.

This concludes our question and answer session I would like to turn the conference back or what's your extra left for any closing remarks.

Wonderful.

I really would like to thank everybody for joining this call. This morning, and everyone that desktop metal as well for your interest in the company.

And really again I want to thank all team D M across the world and that is helping US build this great company on tremendous work to the start of the year.

We're looking forward to speaking to all of you again in the second quarter call. Thank you.

Yes.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.